SYDNEY/WELLINGTON: The Australian dollar broke past $1.1000 on Monday for the first time since early 1982, before taking a modest breather on news of Osama bin Laden's death. The New Zealand dollar hovered just under last week's three-year highs.
The US dollar nudged higher in thin trading after Al Qaeda's leader was killed on Sunday.
Still, the move was relatively modest and the Aussie eased only a little to $1.0940. It had stretched as high as $1.1011 in morning trade before profit-taking pulled it back to around $1.0950.
Though the US currency could gain when New York starts trading, traders see the Aussie in a $1.0850-$1.1000 range until the Reserve Bank of Australia (RBA) announces the outcome of its May policy meeting on Tuesday.
"The Aussie has to break $1.0850-60 for a deeper pullback to 1.0770," said a trader.
The Aussie has gained 6 percent in the past month, helped in part by renewed speculation of future hikes in interest rates following last week's surprisingly high inflation readings for the first quarter.
The RBA is expected to keep rates at 4.75 percent for a sixth month at this meeting, but might tinker with its statement that inflation would remain consistent with its target band of 2 to 3 percent for the year ahead.
RBA watcher and influential columnist Terry McCrann over the weekend wrote the central bank might hike as early as June and would warn as much in its brief post-meeting statement. The RBA also releases its much longer quarterly Statement on Monetary Policy on Friday.
Gavin Stacey, head of Australia and New Zealand research at Barclays Capital, expects the Aussie to move up rather than down based on his view that markets are underpricing rate hike risks in the near-term.
"The part of least resistance is appreciation. The Australian dollar is the RBA's only friend at the moment," he said. Stacey has forecast a rate hike in June.
The Aussie's initial support is seen at $1.0875 and chart resistance at $1.1082. Some analysts say the runaway currency will top $1.1500 in the next two months.
THE NEW ZEALAND DOLLAR
The kiwi followed the Aussie's coat-tails to hit $0.8104, just shy of last week's three-year high of $0.8110 before retreating to around $0.8065.
Support for the kiwi starts from just below $0.8000, with strong resistance barriers starting from the high of $0.8110 up towards the 2008 post-float high of $0.8215.
The kiwi appeared to dip about 20 points after the news of Osama bin Laden's death, although the broader impact on financial markets is hard to quantify in thin trade said Derek Rankin of Rankin Treasury.
"It's good news for America but I'm not sure how far its going to drive markets along," Rankin said. "We'll have to see how markets trade overnight, and whether US markets read a lot more into this than you would think ought to be the case."
Rankin said with the continued appetite for commodities and the willingness to sell the greenback seemingly firmly entrenched, the kiwi is likely to continue its upward push.
"I still think the kiwi is looking for another crack at $0.8100," Rankin said.
The Australian dollar nudged up to a one-month highs at $1.3565, having gained 3 percent in the past two weeks.
New Zealand has first-quarter jobs and wages data due this week, with expectations for modest wage and job growth, and a slight fall in the jobless rate.
Australian bond futures fell with the three-year contract down 0.030 points to 94.860, while the 10-year contract shed 0.01 point to 94.550.
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