Australia, NZ dollars in demand as economies, commodities outperform
By Wayne Cole
SYDNEY, March 3 (Reuters) - The Australian and New Zealand
dollars edged higher on Wednesday as upbeat economic news at
home and strength in commodity prices globally underpinned
sentiment, while bonds calmed after last week's ructions.
The Aussie nudged up to $0.7835 and further away
from Friday's low of $0.7693, which was hit when a surge in
global bond yields spooked investors out of riskier assets.
It faces layers of resistance from $0.7845 to $0.7915, and
remains well short of last week's three-year top of $0.8007.
The kiwi rebounded to $0.7302, after briefly
dipping as low as $0.7210 overnight. Resistance lies around
$0.7305 and $0.7360.
Australian data showed the economy grew a rapid 3.1% in the
December quarter, easily topping forecasts of 1.5% and the
strongest back-to-back quarterly performance in the 60-year
history of the series.
Gross domestic product was still down 1.1% on the year,
reflecting the deep damage done during the pandemic lockdown,
but all the signs are activity has remained robust with
consumers spending freely.
The bond market greeted the data with equanimity given the
Reserve Bank of Australia (RBA) had only just re-committed to
keeping policy super easy.
The central bank is determined to push wages and inflation a
lot higher before tightening, and there was scant evidence of
domestically driven inflation in the GDP report.
Still, the outlook for brisk growth is seen justifying much
of the recent increase in yields, even if the speed of the move
"We think that pressure on the RBA is building," said Nomura
economist Andrew Ticehurst. "Data continue to beat consensus,
house price momentum appears to be accelerating, and rising job
ads bode well for future employment growth."
He now doubted the RBA would extend its three-year yield
target to the November 2024 bond. He also favoured buying the
Aussie against the euro given the different growth dynamics in
Implied three-year yields in the futures market are trading
around 0.30%, suggesting investors believe the RBA will
have to lift its 0.1% target over time.
While yields on 10-year paper have steadied at
1.71%, off the recent peak of 1.97%, they are still up 73 basis
points on the year.
The kiwi got a fillip of its own from the latest auction of
dairy, the country's biggest goods export, which saw prices soar
15%. Prices for whole milk powder jumped 21% to the highest in
seven years, promising a windfall for farmers.
(Reporting by Wayne Cole; Editing by Muralikumar Anantharaman)
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