SYDNEY: The Australian and New Zealand dollars rose broadly on Monday to fight stiff chart resistance, though investors remained cautious about the future of the Federal Reserve's stimulus policy.
The Aussie rose as high as $0.9234, where it met heavy technical resistance, from $0.9182 on Friday. It has tried four times in a week to break above $0.9215/20 and a sustained move higher would target another strong barrier at $0.9320/45.
Traders suspect, however, that the bounce had more to do with how short the market had been than anything else.
"A slightly positive tone on China caught Aussie shorts," said Michael Turner, a strategist at RBC Capital Markets.
Encouraging economic data from China, Australia's key export market and rising commodity prices underpinned the Aussie.
Iron ore, Australia's single biggest export earner climbed to its highest in five months last week.
Still, investors remain wary of the Fed and await Wednesday to see if minutes of the Federal Reserve's last policy meeting will offer some clarity on when it might start scaling back stimulus.
The Aussie has lost 13 percent this year to hit a three-year low earlier this month. Traders cited stops above $0.9225 with larger ones above $0.9240.
The New Zealand dollar powered up to a two-month peak of $0.8130, from $0.8106 on Friday, undeterred by reports of another dairy issue in New Zealand.
New Zealand's agricultural regulator revoked export certificates for four China-bound consignments of lactoferrin manufactured by Westland Milk Products after higher- than-acceptable nitrate levels were found.
The announcement comes after the world's largest dairy exporter Fonterra found a bacteria in some of its milk ingredients earlier this month.
Dairy is New Zealand's biggest export product.
"The food scare was not that big of a deal," said RBC's Turner, expecting the kiwi to remain well supported above $0.8100.
The kiwi dollar has shown remarkable resilience, overcoming concerns following another strong earthquake. Investors are still pricing in a total of 84 basis points of rate hikes in the coming months with analysts forecasting a move early 2014.
Key resistance was found near $0.8129, the two-month peak touched on Friday.
New Zealand government bonds eased, sending yields 3 ticks higher at the long end of the curve.
Australian government bond futures fell to multi-week lows with the three-year bond contract down 4 ticks to 97.170. The 10-year contract retreated 6 ticks to 96.965, the lowest since late June.
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