The Australian and New Zealand dollars proved resilient on Thursday against a broadly firmer US counterpart and sliding iron ore prices, as carry trade demand drove the pair to multi-month peaks against the yen. The Australian dollar edged up to $0.7390, having skidded 1.3 percent on Thursday when US bond yields surged. Support was found at $0.7364.
It briefly dipped following a surprising 4 percent drop in local business investment versus forecasts of a 2.5 percent fall. Planned investment estimates for 2016/17 also came in well under expectations at $106.9 billion. While the data underlined the risk of an economic contraction in the third quarter, a rare event in the Australian economy, the Aussie dollar quickly recovered as the report did little to change the market's view on interest rates.
The Aussie held near seven-month highs against the yen to trade at 84.45. A break of 84.81 would test the April peak of 86.46. The Aussie surged nearly 6 percent last month. Likewise, the New Zealand dollar climbed to 81.25 yen, a level unseen since early this year. It rallied more than 8 percent in December, the largest monthly gain in seven years. Against its US counterpart, the New Zealand dollar was steady at $0.7080. It dipped 0.7 percent on Thursday and away from this week's peak of $0.7170.
Following a rout in US Treasuries, New Zealand government bond yields rose as much as 10 basis points at the long end of the curve. Australian government bond futures also eased, with the three-year bond contract off 5 ticks at 98.040. The 10-year contract dropped 8 ticks to 97.2300 in a bearish steepening of the curve. The 20-year contract was steady at 96.6125. Australian 10-year cash bond yields rose to 2.80 percent and a break of 2.82 percent would be the highest since early January.
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