SYDNEY: The Australian dollar was higher on Tuesday as the commodity-pegged economy recovers following its relative success in combating COVID-19, while its New Zealand counterpart traded slightly lower but still near recent peaks.
The Aussie dollar edged five basis points higher to $0.7422 , having touched a 27-month peak of $0.7253 last week. The Aussie has returned to its 2018 levels after sliding to a $0.5510 pandemic low in March.
In Australia, a measure of business confidence and conditions showed a surge in November to "above average" as the second-largest state of Victoria emerged from its lengthy virus-induced lockdown and other states opened their borders to each other.
"The goldilocks label is starting to look quite apt for the Australian economy," Credit Suisse portfolio manager Jasmin Argyrou said.
"In general our economy is faring a lot better than we originally feared when the pandemic first started we haven't seen consumer confidence this high for about seven years and we're starting to see business confidence and business conditions pick up quite rapidly as well."
Jumping 9 points in November to +12, the National Australia Bank's index of business confidence has come a long way since hitting a trough of -34 in April at the height of the pandemic and surpassing its long-run average as Australia reopened its economy earlier than expected.
The recovering global economic growth underpinning commodities, a soft dollar and highly accommodative monetary policy, should provide support for the Australian dollar in 2021, with Credit Suisse expecting it to stay between $0.74 and $0.76 in the next 12 months.
The New Zealand dollar was fetching $0.7033 on Tuesday, nine basis points lower on the day but still short of its recent 31-month top of $0.7104 on Dec. 3.
"So far the pullback of the past two days appears to be only a mild correction to an uptrend which remains intact," Westpac Banking Corp analysts said in a note.
"Global risk sentiment has stalled for now but New Zealand commodity prices continue to rise and the domestic economy remains resilient."
Westpac expects the kiwi will reach $0.7200 by year end.
New Zealand government bonds were largely unchanged, with yields about one basis point lower across the long-end of the curve.Australian government bond futures were mixed, with the three-year bond contract down half a tick at 99.81 and the 10-year contract gaining one tick to 98.97.