SYDNEY/WELLINGTON: The Australia and New Zealand dollars drifted off multi-week highs against the US dollar and euro on Monday, partly on light profit-taking following a recent rally.
The Australian dollar paused at $0.9395, from a high of $0.9427 on Friday and a two-month peak of $0.9438 also touched last week.
It was unable to hold gains above $0.9400 as geo-political tensions in Iraq weighed somewhat on risky assets, including stocks.
The euro trimmed recent losses to A$1.4408, but remained close to a seven-month trough of A$1.4353 touched last week. On a trade-weighted basis, the Aussie held at 72.1, a level not seen since November.
The Aussie dollar has proved resilient to a sharp decline in the price of iron ore, the country's largest export earner, with investors attracted by its relative yield advantage in a low rate world.
Minutes of the Reserve Bank of Australia's June policy meeting are due on Tuesday and are likely to underline the steady outlook for rates. The central bank has kept rates steady at 2.5 percent for 10 months amid signs past cuts were working to energise the economy.
"The overall tone of member discussions is likely to confirm a neutral stance," said Greg Moore, a senior strategist at RBC Capital Markets. Interest rate futures imply the cash rate should remain at 2.5 percent out to the end of the year.
The New Zealand dollar has also been a major recipient of the desperate search for yield.
It was last at $0.8671, having hit a five-week high of $0.8700 last week.
It edged up to a 2-1/2-week high against the Aussie , which slipped to around NZ$1.0824. Against a currency basket it was at 80.70, not far from a high of 80.94 set on Friday.
Markets participants expect the outlook for higher New Zealand rates will support the kiwi this week ahead of a reading of first-quarter domestic GDP due on Thursday. Forecasts are for a further pick-up in economic growth to 3.7 percent for the year.
"It still has a bullish bias because of the interest rate track, and ahead of the GDP," said Tim Kelleher, head of institutional FX sales at ASB, adding that he expected the kiwi to be hemmed between $0.8625 and $0.8700 for much of the week.
A surprisingly strong reading could push the kiwi towards a 2-1/2-year high of $0.8779 hit last month, although offers were expected in the $0.8700-$0.8750 region.
Kelleher at ASB said that strong fundamental support for the kiwi could limit any significant downside.
Support was found at $0.8656, the top of the kiwi's Ichimoku cloud, while resistance was seen at $0.8694.
Short- to mid-dated New Zealand government bonds slipped, pushing yields as much as 2 basis points higher.
Ten-year bond yields climbed to a seven-week peak of 4.51 percent, from 4.26 percent two weeks ago.
Australian government bond futures rose, with the three-year bond contract up 2.5 ticks at 97.185. The 10-year contract added 3.5 ticks to 96.255, having touched a one-month low last week.
Comments
Comments are closed for this article.