SYDNEY: The Australian and New Zealand currencies gained on Monday as the US dollar weakened on an escalation in global trade tensions, though negative sentiment in equity markets could limit further gains. The Aussie rose 0.2% to $0.6449, building on a modest 0.5% gain in May. It remains to be seen if it can sustain levels above the 200-day moving average of $0.6441, a threshold it has struggled to hold for the most part of last month.
The kiwi dollar also advanced 0.5% to $0.5991 in holiday-thinned trade, after finishing last month with a modest rise of 0.6%. It is facing some heavy resistance at 60 cents and support is at the 200-day moving average of $0.5872.
The US dollar starts the week on the back foot after President Donald Trump threatened to double duties on imported steel and aluminium to 50% from Wednesday. He accused China of breaching agreements made during Geneva trade talks.
“The broad-based USD selling is benefiting high-beta anti-dollar currencies such as Aussie and kiwi. This may be the latest iteration of the ‘sell America’ trade as a response to the post-close steel tariffs announcement,” said Sean Callow, a senior analyst at ITC Markets.
“This is not the ideal fuel for AUD and NZD, however, with upside likely limited by the pullback in equity sentiment.” Down Under, the Reserve Bank of Australia will publish the minutes of its May policy meeting on Tuesday.
The RBA cut interest rates to a two-year low last month and left the door open to further easing as cooling inflation at home offered scope to counter global trade risks. RBA Assistant Governor Sarah Hunter is scheduled to give a speech at 1:05 p.m. local time (0305 GMT) on Tuesday about Australia’s links with the world economy.
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