SYDNEY/WELLINGTON: The Australian dollar climbed to a six-week high on Tuesday after data showing a surge in domestic business confidence bolstered the outlook for the economy and pared bets on another cut in interest rates.
The Aussie climbed as far as $0.9267, its highest since late July, and added to last week's gains of more than 3 percent. It last fetched $0.9258, but faced stiff resistance between $0.9295 and $0.9317.
The New Zealand dollar was also firm at a three-week high of $0.8040.
The latest gains came after National Australia Bank's measure of business confidence jumped to a 27-month peak in August following a cut in interest rates and ahead of an expected election victory by the conservative Liberal National Coalition.
Analysts have been hoping the clear victory of the business-friendly Coalition and the end of minority government would embolden firms and households to spend more.
Surveys globally have shown a sharp and synchronised improvement in business confidence across developed economies which could bode well for commodity demand, and thus resource exporters like Australia and New Zealand.
All of which has seen markets pare back expectations for another cut in rates from the Reserve Bank of Australia (RBA). Interbank futures now put the probability of an easing by year-end at 40 percent, when it was a sure bet just a couple of week ago.
NAB's chief economist, Alan Oster, still expects an easing to 2.25 percent in November, in part to offset the appreciation of the local dollar which is tightening conditions.
Still, he also had some doubts.
"Clearly one risk to a November cut is that the bounce in confidence is maintained in September," he added. "This might cause the RBA to delay the next rate cut which we think the economy needs."
The survey followed figures from China that have shown a pickup in exports and benign inflation, while more data on retail sales and industrial output is due later. The Asian giant is the single biggest export market for Australia and New Zealand.
Investor appetite for risk was also aided by a Russian proposal on Syria that raised the chance a US military strike would be delayed or averted.
That lifted shares across Asia and pressured the safe-haven yen. The Aussie pushed up to 92.02 yen, ground last trod on July 24. The kiwi was likewise firm at 79.84 yen .
Traders said the kiwi faced offers between $0.8060 and $0.8080, which barred the way to $0.8165, a three-month high hit in August.
The kiwi may struggle to push much beyond $0.8100 in the near term, given a quarterly monetary policy statement from the Reserve Bank of New Zealand is due on Thursday.
While the RBNZ is widely expected to maintain its pledge to hold interest rates at a record low 2.5 percent through year-end, RBNZ Governor Graeme Wheeler may be reluctant to sound too hawkish for fear of pushing the kiwi higher, a big drag for sectors such as manufacturing.
New Zealand government bonds edged up slightly, nudging longer-dated yields down 1 basis point.
Australian government bond futures turned lower once again with the three-year bond contract off 4 ticks at 97.000. The 10-year contract lost 4 ticks to 95.890.
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