Australia, NZ dollars rise on firm recovery prospects

SYDNEY: The Australian and New Zealand dollars rose against the greenback on Tuesday, clawing back the previous day's losses as markets bet on a quick economic recovery in 2021 once coronavirus vaccinations are widely distributed.

The Australian dollar was 42 basis points higher at $0.7697 in thin trading volumes, having held above $0.77 over the last two sessions, a barrier not cleared since April 2018.

The New Zealand dollar was 45 basis points higher at $0.7204, also near its multi-year intraday high of $0.7241 of Dec. 31.

Both currencies had closed lower on Monday, as concerns about surging COVID-19 cases and uncertainty about US runoff elections in Georgia fuelled demand for safer assets.

However, both the kiwi and the Aussie, liquid proxies for risk, have been buoyed by rising commodity prices and their countries' success in containing the coronavirus pandemic, though an outbreak in Sydney is threatening to grow into the new year.

"There is still a degree of uncertainty as we enter the year, a degree of hope but a degree of uncertainty," said CommSec economist, Craig James.

James said Australia's broad success in managing the pandemic would likely support a rapid economic and market recovery and push the Australian dollar towards 78 US cents.

"We think as we go into 2021 the prospects are very positive (and) the Aussie dollar will be back in favour in a year which will be much more on growth, here in Australia and globally."

New Zealand government bonds rose, sending yields about 5 basis points lower at the long-end of the curve.

Australian government bond futures were slightly higher, with the three-year bond contract up half a tick at 99.83. The 10-year contract was 4 ticks higher to 99.01.