The Australian and New Zealand dollars firmed against their US counterpart on Monday, as rising commodity prices and relatively high bond yields underpinned sentiment for carry trades. The Australian dollar edged up in light trading to $0.7456, from a low of $0.7400 on Friday, and away from a five-month trough of $0.7311 touched last week.
Initial resistance was found at $0.7489, the 38.2 percent retracement of the $0.7778-$0.7311 decline. Strong support was found at $0.7365-70 and a break would signal a test to $0.7286. Helping the Aussie were buoyant commodity prices, particularly iron ore, Australia's top export earner. Iron ore futures traded in China extended last week's hefty gains with a 3.5 percent rise.
Also helping was carry demand, where investors borrow at low rates in yen to buy higher yielding assets such as the Aussie and the New Zealand dollar. The Aussie fell to 83.31 yen, from 83.94 in early trade, but that was still near a seven-month peak touched on Friday. It rose 3.2 percent last week. The kiwi slipped to 79.09 yen, from 79.48, having touched an 11-month peak of 79.76 on Friday.
Against its US peer, the New Zealand dollar bounced to $0.7057 having been as low as $0.6970 last week. New Zealand government bonds gained, sending yields 6 basis points lower at the long end of the curve. Australian government bond futures bounced from multi-month lows, with the three-year bond contract up 4 ticks at 98.110. The 10-year contract rose 6.5 ticks to 97.3400, while the 20-year contract added 6 ticks to 96.7350. Australian 10-year cash bond yields dipped to 2.76 percent, from 2.83 percent last week which were the highest since early January.
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