SYDNEY: The Australian and New Zealand dollars were holding hefty weekly gains on Friday as risk sentiment improved even as commodity prices stayed sky high, a potent mix for the resource-rich currencies.
The Aussie was up 1.3% on the week at $0.7386, quite a recovery given it was down at $0.7165 just a couple of days ago.
The next bull target is the recent four-month top of $0.7440.
The kiwi reached $0.6894, to be up 1.2% for the week and away from a trough of $0.6729. It now faces resistance at the 200-day moving average of $0.6915.
Australia, NZ dollars on edge for uber-hawkish Fed
The Aussie also extended a recent surge on the Japanese yen to reach the highest since early 2018 at 87.48 yen, a rise of 2.3% for the week so far.
Japan is facing a painful terms of trade shock from high commodity prices, while Australia benefits as a major exporter.Ray Attrill, NAB’s head of FX strategy, noted the conflict in Ukraine had EU leaders looking to reverse decades of energy dependence on Russia.
“Other countries will also be looking to reduce dependence on Russian exports of oil, metals, fertilisers, wood and cereals,” he added. “The impact of the war on commodity markets will be potentially far-reaching and long-lasting. This dynamic is positive for Australia and NZ’s terms of trade.”
He sees the Aussie around $0.7700 by the end of the year, with the kiwi at $0.7200.
The gains on the yen also reflect a jump in Australian bond yields while Japan is committed to keeping yields around zero.
Australian 10-year bond yields have climbed 38 basis points in just the past two weeks to reach 2.527%, ground last trod in December 2018.
Futures have further narrowed the odds on the Reserve Bank of Australia (RBA) raising its 0.1% cash rate by June, following a very strong jobs report out on Thursday.
Futures now imply rates will be around 1.40% by the end of the year, compared to 0.8% back in January.
The RBA’s next policy meeting is on April 5 and there is some speculation it may drop a reference to being “patient” on rate hikes given the tightening labour market and accelerating inflation at home.