Australia, NZ dollars hit five-week highs on rising commodity prices, economic recovery

SYDNEY: The Australian dollar hit its highest level in nearly five weeks on Tuesday after the central bank sounded upbeat on the country's economic recovery, while higher commodity prices also underpinned the currency.

The Aussie gained 0.54% to $0.7796 - its highest since March 18 - after minutes from the Reserve Bank of Australia's April meeting showed the RBA sees a faster rebound from the pandemic.

Australia's economic recovery has surpassed all expectations with an "above-trend" expansion likely this year and next, the minutes showed on Tuesday.

A weaker greenback overnight also helped lift the kiwi dollar by 0.48% to $0.7215, also near a five-week high, with the currency crossing the $0.72 barrier for the first time since March 18.

"The solid economic rebound in Australia, improving global economic outlook and elevated commodity prices all suggest AUD can lift above 0.80 in coming months," Commonwealth Bank of Australia strategists said in a note.

Iron ore prices rose on Tuesday, extending recent gains spurred by improved steel profit margins in top steel producer China. Disappointing output figures from major miners Rio Tinto and Vale SA have added fuel to the rally.

In the medium-term, the Kiwi and Aussie dollars should benefit from a global economic recovery, along with other cyclical currencies and commodities, Australia and New Zealand Banking Group analysts said.

"We expect global growth to recover as vaccines are rolled out, which should in turn be good for Asian growth ... and that speaks to further upside risks to the NZD, particularly if house prices hold up."

New Zealand's 10-year bond yields were 5 basis points higher at 1.673%.

Yields on 10-year Australian bonds rose 5 basis points to 1.72%, even as the central bank minutes showed the RBAis still in no hurry to tighten policy settings.