SYDNEY: The Australian and New Zealand dollars were holding their ground on Friday as the Russian invasion of Ukraine caused major mood swings in markets, but also boosted prices for resources Australia is rich in.
The Aussie had steadied at $0.7179, having bounced from an overnight low of $0.7095, but remained short of a five-week peak of $0.7284 touched on Wednesday.
That left it almost unchanged for week. It was helped by gains on the euro which slid to a three-month low of A$1.5545 overnight.
The kiwi dollar stood at $0.6692, after a couple of wild sessions saw it touch a peak of $0.6808 before diving as deep as $0.6630.
The Aussie has been indirectly supported this week by bumper dividend payments from miners which are converted from US dollars to Aussie and might have been worth around A$20 billion. Most of this has been done, however.
"With the vast bulk of the miner dividend FX conversion now behind us and the shocking developments in Ukraine very much front of mind, we are surprised the A$ has not pushed lower," said Westpac's head of FX strategy Richard Franulovich.
New Zealand dollar jumps as RBNZ flags more hikes ahead
He noted Australia's position as a net energy exporter, particularly of liquefied natural gas and coal, was a buffer for the Aussie. European natural gas prices were up 51% overnight, while Asian LNG rose 28% and Newcastle thermal coal 16%.
"However, the continued surge in energy inflation acts as a tax on growth and a source of concern for central banks," said Franulovich.
"We still see AUD weakness developing through the end of the month."
The geopolitical uncertainty combined with a benign wages report at home has seen markets trim wagers on a rate hike from the Reserve Bank of Australia (RBA) as early as June, though it is still fully priced for July.
The RBA holds its March policy meeting next week and is certain to keep rates at 0.1%, putting the focus on its reaction to Ukraine and the wages report.
The super-hawkish Reserve Bank of New Zealand (RBNZ) showed no sign of pausing with Governor Adrian Orr on Friday saying rapid hikes were needed to head off inflation.
The bank lifted rates a quarter point to 1.0% earlier this week and projected they could reach as high as 3.35% by early 2024.
That aggressive outlook sent two-year swap rates surging 22 basis points on the week to 2.775%, while market price in rates of at least 2.5% by year end.
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