WELLINGTON/SYDNEY: The Australian and New Zealand dollars marked time on Monday, mirroring a generally aimless currency market that appeared to be waiting for fresh cues this week from China data and Federal Reserve Chair Janet Yellen's congressional testimony.
The Aussie traded at $0.9399, having drifted in a slim $0.9370/9401 range so far this session. Since April, the Aussie has basically been flatlining near 94 US cents.
Investors are nervous about pushing it much higher, but the Aussie's attractive yield continues to be a major drawcard in the current low volatility environment.
Indeed, the global chase for better returns has pushed Australia's 10-year bond yield to 13-month lows at 3.427 percent and driven its premium over US Treasuries to less than 100 basis points, the smallest in more than eight years.
The central bank's attempt to talk down the currency for the second time in as many weeks prompted little reaction this time. In an interview with a local newspaper published at the weekend, Reserve Bank of Australia Governor Glenn Stevens said investors are under-estimating the possibility of a "material decline" in the Aussie at some point.
All that effort to jawbone the Aussie lower will probably come to nought if Yellen continues to press home a dovish message on Tuesday.
That should continue to support carry trades.
China's growth and industrial output data on Wednesday will be the next key test. Any signs the Chinese economy is picking up speed seems certain to lift the Aussie. Conversely, a negative reading could undermine demand for it.
Yellen's comments and the China data are likely to have a greater impact than the minutes of the RBA's July 1 meeting on Tuesday, which will probably reiterate the central bank's stance to keep rates on hold for a while yet. "We continue to expect the cash rate to remain at 2.50 percent this year with the next move likely to be up, although not until the first half of 2015," said Paul Bloxham, chief economist of Australia and NZ at HSBC in Sydney.
The New Zealand dollar traded at $0.8820, little changed from Friday, and just under a near three-year high of $0.8839 hit last week.
Versus a currency basket, it was at 81.92, near a post-float high of 82.03 touched on Friday.
The kiwi is also on the cusp of hitting a post-float high of $0.8842, as ongoing interest rate rises in New Zealand boost the kiwi's rate advantage.
The kiwi could take another stab higher if Q2 consumer price figures on Wednesday show inflation risks are increasing, so only adding to expectations that the Reserve Bank of New Zealand will raise interest rates to 3.5 percent next week.
Technical support was seen at $0.8782, based on trendline support drawn from a low hit at the start of June, while resistance was seen into $0.8850, where offers were suspected.
Strong bids seen around $0.8700 were likely to minimise any big losses in the near term.
New Zealand government bonds firmed a touch, nudging yields 1 basis point lower across most maturities.
Australian government bond futures reached fresh multi-month peaks before slipping back.
The three-year contract eased 4 ticks to 97.410, having earlier hit a 11-month high of 94.470.
The 10-year contract scaled a 13-month peak of 96.600 before retreating to 96.545, 4 ticks lower on the day.
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