SYDNEY: The Australian and New Zealand dollars crept higher on Thursday as a key commodity index jumped to four-month peaks and provided support amid a dearth of major domestic economic data.
The Aussie inched to up $0.6626 and away from the week’s trough of $0.6583.
Resistance comes in at $0.6638 and last week’s top of $0.6667.
The kiwi dollar added 0.1% to $0.6164, after finding support at $0.6136 early in the week.
Major resistance lies at $0.6217. Sentiment benefited from gains in some commodity prices, as concerns about supply lifted oil and copper.
Both Australia and New Zealand are major resource exporters.
The S&P GSCI commodity index, for instance, boasted it biggest daily gain since late January to break stiff chart resistance and hit levels last seen in mid-November.
That was timely for Australia as its biggest export earner, iron ore, has been on the slide in recent weeks due to signs of soft demand from China.
“It’s interesting to note that the fickle relationship between the AUD and iron ore continues - sometimes they move together and sometimes they don’t,” noted Rodrigo Catril, a senior FX strategist at NAB.
Australia, NZ dollars left deflated as US inflation disappoints
“On the other hand, the AUD tends to have a stronger and more stable relationship with copper, as it tends to be a good barometer of global growth/manufacturing activity.”
The retreat in iron ore is proving a drag on Australian government revenue and will shrink its budget surplus in the current fiscal year.
Yet, the government still plans to sell only A$50 billion ($33.14 billion) in bonds this fiscal year, less than a third of the $117 billion the United States borrowed just this week.
The gulf in issuance plans helped Australian 10-year bond yields trade 18 basis points below Treasuries, the biggest discount in five months.
The next domestic hurdle for the Aussie is the Reserve Bank of Australia’s (RBA) policy meeting on March 19.
Analysts are certain rates will stay at 4.35% but see some chance the board will sound more dovish on the outlook given a recent improvement in monthly inflation numbers.
The RBA will have to compete for attention with a Bank of Japan meeting which could see the end of negative interest rates and perhaps boost the yen.
The Federal Reserve also meets the day after and should offer guidance on when a US rate cut might be forthcoming.
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