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Australia dlr holds gains after RBA, coronavirus lockdowns a concern

By Wayne Cole

SYDNEY, July 7 (Reuters) – The Australian dollar held recent gains on Tuesday as a rise in Chinese stocks supported risk appetite globally, while Australia’s central bank kept rates at record lows amid a worrying rise of coronavirus cases in the country.

The Aussie was steady at $0.6970 having earlier touched a three-week top of $0.6998. The next major chart target is June’s peak of $0.7069, while support lies at $0.6950 and $0.6900.

The Reserve Bank of Australia (RBA) ended its monthly policy meeting by keeping interest rates at 0.25% as expected and reiterating it stood ready to ease further if needed.

The bank again noted the economic downturn in Australia was likely to be less dire than first feared, but also cautioned the outlook for activity and the virus was uncertain.

One stumbling block has been a renewed outbreak of the coronavirus in Victoria which has seen lockdowns in some suburbs of Melbourne and the closure of the border with New South Wales.

“The lockdown of large swathes of suburban Melbourne and the closure of the state border are a setback to hopes for a quicker re-opening of Australia’s second largest economy,” said Ryan Felsman, a senior economist at CommSec.

“The virus hit to tourism, international education and migration has already been pronounced, and the impact on consumer spending is evident.”

ANZ reported spending on its cards was still up a strong 5.2% in the week to July 3, compared to a year ago, but growth in Victoria was starting to lag other states.

The RBA has committed to keeping three-year bond yields near 0.25% for some years to come, and so far have had little trouble doing so.

The bank has bought no bonds through tender for more than two months now, though it is buying bonds outright in its regular money market operations.

Yields on 10-year debt were steady at 0.92% having held between 0.895% and 0.977% for three weeks now.

The kiwi dollar held at $0.6550, just short of the recent five-month top of $0.6585. Support stands at $0.6533 and $0.6510.

Like the Aussie, the kiwi has benefited from dogged market optimism on the world economy which has driven up asset prices across the globe, helping it clear chart resistance.

“NZD/USD broke above a month-old contracting range at $0.6500, signalling a move to $0.6585 during the next day or two, and potentially to $0.6700 multi-week,” said analysts at Westpac. (Editing by Lincoln Feast.)


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