SYDNEY: The Australian dollar came off a month high on Thursday, after a spectacular run up over the past week on a hawkish local rate outlook, while short-term local yields climbed to the highest in 11 years, continuing its recent ascent.
The Aussie was hanging at $0.6660, after hitting a one-month high of $0.6718 overnight.
It faces strong resistance at its 200-day moving average of $0.6691 and has support at the 14-day moving average of $0.6584.
The kiwi dollar was changing hands at $0.6046, having eased 0.7% overnight to as far as $0.6031.
It has support at a seven-month trough of $0.5986 hit just last week.
The US dollar was aided by rising yields after the Bank of Canada surprised by resuming its tightening after four months of pauses, a move that could help the Federal Reserve retain a hawkish stance when policymakers meet next week.
The Aussie’s low of 0.6458 in late May could be the trough for the current quarter, said Commonwealth Bank of Australia currency strategist Carol Kong.
“Our updated RBA (Reserve Bank of Australia) views point to upside risks to our AUD/USD forecasts,” she said. Commonwealth Bank now expects one more rate hike to a peak of 4.35%, compared with a previous forecast of 3.85%.
“That said, the deteriorating global economic outlook and the weakness in the Chinese economy will remain headwinds for AUD/USD in our view.”
Indeed, data showed on Thursday that Australia’s exports fell by 5% in April from the previous month, led by sharp falls in iron ore and metals. China is the biggest buyer of Australian iron ore.
Australia dollar soars, bond yields jump after RBA flags more hikes
Three-year government bond yields hit an 11-year high of 3.857%, up 40 basis points this week.
Ten-year yields climbed to a five-month high of 3.984%, leaving the premium over two-years to a negative 4 basis points.
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