SYDNEY: The Australian and New Zealand dollars rose on Monday on the back of higher commodity prices, while the Aussie was also supported as coronavirus restrictions eased in the country's most-populated state New South Wales.
The Aussie rose 0.24% to $0.7325, near a three-week high of $0.7338 hit on Friday, as gyms and restaurants in Sydney welcomed back fully vaccinated customers after nearly four months of lockdown.
Higher oil and iron ore prices also helped keep the antipodean currency away from a five-week low of $0.7170 hit on the Sep. 29, analysts said.
But Westpac strategists warned of challenges ahead for the Aussie.
"Global activity faces a number of very significant headwinds, not least the possibility of energy shortages over the coming winter which won't help AUD sentiment," they said in a note.
"We still tend to see markets as underpricing the risks to growth from energy shortages and the coming Chinese property crises and thus still see a final push lower to the 0.70/ 0.71 region," the Westpac strategist said.
A rebound in global economic activity from the COVID-19 pandemic has exposed the low supplies of natural gas worldwide, leaving traders, industry executives and governments scrambling as the northern hemisphere heads into winter.
Last week, China ordered miners in Inner Mongolia to ramp up coal production as a record surge in the cost of gas revived demand for the most polluting fossil fuel to keep factories open and homes heated.
The New Zealand dollar was 0.06% higher at $0.6930, after a choppy session that saw it test resistance at $0.6970 and support at $0.6889.
The Reserve Bank of New Zealand (RBNZ) last week raised rates for the first time in seven years, and the market is now pricing in a high probability that it will hike again in November.
On Monday, the country reported a slight easing in new COVID-19 cases in the country's biggest city of Auckland, as authorities look to step up vaccination efforts to contain the outbreak of the Delta variant.
Bond yields continued their trend higher on Monday, buoyed by their US counterparts. US Treasury yields hit multi-month highs on Friday in the wake of a weaker-than-anticipated September employment report that was still expected to keep the Federal Reserve on track with its tapering plans.
Australian 10-year bond yields rose 7 basis points to 1.72%, their highest since May 20.
New Zealand 10-year bond yields were up four basis points at 2.11% - its highest since early 2019.