Wednesday, 02 January 2013 09:56
SYDNEY: The Australian and New Zealand dollars scaled four-year peaks against the yen and leaped on their US counterpart on Wednesday after the last minute approval of a US fiscal deal dodged one major danger to the global economy.
The Aussie surged to $1.0495, after breaking key resistance levels, including $1.0435, the 38.2 percent retracement of the $1.0585/$1.0345 move.
It was up nearly two cents from late trading in New York on Monday and approaching a three-month peak of $1.0585 hit last month. It last fetched $1.0475.
"The deal was certainly welcomed by the Aussie, euro and equities. European and US markets should follow it through positively," said Sean Callow, a senior currency strategist at Westpac, seeing scope for the Aussie to potentially pop over $1.0500.
The US Congress approved a rare tax increase on the nation's wealthiest households while cementing lower rates for most Americans. The deal averted what would have been a huge drag on the US, and global, economy to the benefit of equities, commodities and growth-sensitive currencies.
Callow, however, showed caution about another looming danger that could affect risk appetite.
"How long before we start worrying about the US debt ceiling?" he asked. Analysts estimate the debt ceiling will have to be raised by the end of February or risk possible default.
For now, immediate resistance was found around $1.0500, ahead of $1.0585, the Dec 12 high.
Also underpinning the Aussie was a continued climb of iron ore prices, which jumped to fresh eight-month peaks at $144.90 a tonne Prices are now up 67 percent from the lows hit in September, a boon to national income as the steel-making mineral is Australia's single largest export earner.
The kiwi dollar was catapulted more than a cent higher to $0.8385, with paper-thin liquidity exaggerating the move. New Zealand markets are closed for a public holiday.
The currency has gained 1.3 percent in four sessions, well off one-month lows of $0.8156 touched last week. A sustained break above $0.8264, the 50 percent retracement of the November-December rally, would open the way to $0.8400.
It last changed hands at $0.8267.
The kiwi has been underpinned by bets of stronger growth next year as earthquake rebuilding in Christchurch is set to gain momentum.
Also helping is a recovery in milk prices, up around 6.5 percent versus a currency basket last year, its best performance since 2009.
The Antipodeans made even bigger strides against a floundering yen, climbing to levels not seen since September 2008.
The Aussie jumped as far as 91.97 yen, up more than 1 percent on the day with daily moving averages pointing north. Charts suggest little real resistance until 93.20 yen, the September 2008 peak.
The safe-haven yen has come under broad pressure in recent weeks on expectations the Japanese central bank will have to take ever bolder measures to jumpstart its ailing economy.
The kiwi outperformed, leaping nearly 2 percent to 73.13 , having already gained a whopping 20 percent last year.
Improving risk appetite sent Australian government bonds reeling, with the three-year contract 0.13 points lower at 97.200.
The 10-year contract slipped even more, dropping 0.14 points to 96.610, nearing August lows of 96.560. A break would open the way for a test of 96.485, the May 7 trough.
New Zealand government bond market was shut for the new year holidays.
Center>Copyright Reuters, 2013