SYDNEY: The Australian and New Zealand dollars were near their highs for the year so far on Monday as high bond yields and flows out of the Japanese yen squeezed more speculators out of short positions.
The Aussie was up at $0.7420, after rallying 1.7% last week and away from a low of $0.7165.
The next bull target is the recent four-month top of $0.7440.
Australia, NZ dollars give ground
The kiwi reached $0.6911, having bounced 1.5% last week and away from its low of $0.6729. It faces resistance at the 200-day moving average of $0.6914 and the March top of $0.6926.
The Aussie has been helped by flows out of the low yielding Japanese yen, which saw it surge 3.3% last week to the highest since early 2018 at 88.48 yen. Major resistance now lies just above 89.00.
“This cements the AUD position as the strongest G10 currency year to date and AUD/JPY one of the best performing cross rates,” said Ray Attrill, head of FX strategy at NAB.
He noted there had been a sharp decline in speculative short positions in the Aussie on the IMM.
“Evidently, some of those betting on AUD inevitably being one of the main currency market casualties of Russia’s invasion of Ukraine, have been forced to run for cover,” said Attrill.
Both the Aussie and kiwi have been underpinned by rising bond yields, with Australian 10-year yields up a steep 41 basis points in the past two weeks at 2.548%, putting them almost 40 basis points above Treasuries.
New Zealand 10-year yields have climbed 39 basis points to 3.18%, or a whopping 103 basis points above US yields.
Markets have already priced in a strong chance of rate hikes in both countries and there is little in the way of major domestic economic data due this week to change that view.
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