Australia, NZ dollars extend gains as stocks rally, yen weak

SYDNEY: The Australian and New Zealand dollars extended their gains on Monday as global stocks bounced sharply from the recent selloff and precious metals recovered, with flows out of the Japanese yen also providing support.

The Aussie hit a new 36-year peak of 110.7 yen, after Japanese Prime Minister Sanae Takaichi won a historic election on Sunday, paving the way for more fiscal spending.

The kiwi scaled a 1-1/2 year top of 94.95 yen.

Against the US dollar, the Aussie edged up 0.2% to $0.7028, having rallied 1.3% on Friday as Wall Street bounced back from a week of heavy losses. It is just a touch below the three-year top of $0.7094, with support around 69 cents.

The kiwi dollar was steady at $0.6020, after jumping 1.2% on Friday to offset losses earlier in the week.

Resistance is around a seven-month peak of $0.6092. Joseph Capurso, head of international economics at the Commonwealth Bank of Australia, expects the Aussie to move back up closer to 71 cents if US economic data comes in softer than expected this week.

“However, AUD will underperform, especially against the major cross rates if the shakeout in equities and metals prices intensifies.” Australian household spending fell in December as consumers pulled back after splurging on year-end sales events, data showed on Monday.

However, sales volumes grew at a solid pace, offering the central bank some vindication for its decision to raise rates to rein in inflation just last week.

Markets will keep an eye on Reserve Bank of Australia Deputy Governor Andrew Hauser, who is scheduled to make public remarks on Wednesday and Governor Michele Bullock, who is set to appear before lawmakers again on Thursday.

Policymakers have given little guidance where rates are headed next.

Markets imply a 74% chance of another rate rise in May to 4.1%.

There is an additional tightening of 37 basis points expected this year.

Across the Tasman Sea, the Reserve Bank of New Zealand meets on February 18, which will be the first policy review for its new governor Anna Breman.

Markets are not fully pricing in a hike until October, with September implied at around a 70% chance.