Australia, NZ dollars break higher, data speaks of strong Q1

SYDNEY: The Australian and New Zealand dollars touched three-week tops on Thursday as their US counterpart extended its broad retreat and upbeat data suggested the Australian economy had grown strongly last quarter.

The Aussie stood at $0.7718, after jumping 1% overnight when a break of major resistance at $0.7677 triggered a wave of stop-loss buying. The next target is a high from March at $0.7849.

The kiwi dollar climbed to $0.7145, having gained 1.2% overnight and finally cleared resistance at $0.7070. Its next targets are $0.7187 and $0.7268.

Both currencies also made sizable gains on the yen and euro.

The Aussie got an added fillip from data showing 70,700 jobs were added in March, twice the market forecast, while unemployment dropped to a one-year low at 5.6%.

"The March 2021 labour force survey was another incredibly solid report," said Gareth Aird, head of Australian economics at CBA. "It supports our non-consensus call that the unemployment rate will end the year at 5.0%."

"It's is probably time to stop using the word 'recovery' when referring to the state of the Australian economy. The domestic economy is now simply in expansion mode."

So far, the Reserve Bank of Australia (RBA) has stuck to its super loose monetary policy, emphasising that unemployment will likely have to fall to 4% or lower to get wages and inflation up to desired levels.

That commitment has made bonds resilient to the recent run of upbeat economic news and kept 10-year yields steady at 1.73% and off the recent 1.83% top.

The Reserve Bank of New Zealand (RBNZ) on Wednesday reiterated its commitment to being patient on policy and keeping rates at 0.25% for a prolonged period.

That left yields on 10-year bonds near their lowest in two weeks at 1.720%, with a hike not priced until late next year.

"The first RBNZ rate hike is priced by November 2022, bang on our forecast," said Jarrod Kerr, chief economist at Kiwibank. "And the curve glides higher thereafter, with another hike by the middle of 2023."

"For the kiwi, our year-end forecast of $0.75 offers just a little in the way of upside," he added. "As the world eventually (hopefully) recovers into 2022, we expect it to do a bit more."