SYDNEY: The Australian dollar hit four-month highs on Friday as massive gains in commodity prices promised to shower the country in cash, while investors seeking distance from Europe's woes drove the euro to its lowest on the Aussie in four years.
A week-long rally lifted the Aussie to $0.7330, having finally cracked the January peak of $0.7314 overnight to reach ground last trod in mid-November.
It also topped the 200-day moving average at $0.7324 in a bullish technical break that clears the way to $0.7370 and $0.7480.
The kiwi dollar added 0.9% for the week so far to reach $0.6805, a whisker from its recent peak of $0.6808.
The euro extended its free fall to reach lows last seen in late 2017 at A$1.5059, having dropped for 10 straight sessions. That brought losses for the week to 3.2% and opened the way to the next bear target at $1.4944.
The Aussie also hit a four-month high on the yen as Japan's reliance on imported energy and resources leaves it vulnerable to rising commodity prices.
And rising they have been, with oil briefly reaching $120 a barrel overnight. Wheat gained 40% this week and coal more than 50%, while aluminium hit a record and nickel an 11-year peak. Iron ore joined the party to touch a six-month top after Beijing committed to more infrastructure spending.
All this is a windfall to Australia as a major exporter of resources, with iron ore, coal and liquefied natural gas set to bring in billions more in coming months.
Even before the latest spike, exports had boomed 8% in January to deliver the second biggest trade surplus on record.
"Given commodity prices, our estimate of AUD fair value is in a range of $0.78 to $0.90, centred on $0.84," said Joseph Capurso, head of international economics at CBA.
"Assuming higher energy prices do not cause a downgrade to global growth, we are more confident AUD/USD will end the year near our long-held forecast of $0.8000."
While New Zealand is a net importer of energy, its terms of trade are still at record highs thanks to a boom in dairy. The kiwi also boasts relatively high yields after three rate hikes, with a lot more to come.
Analysts at Westpac noted NZ bonds were due to be included in the widely-used FTSE-Russell World Government Bond Index from April. "This will be a milestone event for the NZGB market, and is expected to broaden participation significantly," they said in a note.
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