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Australia dollar near three-week high as vaccinations quicken

Australia dollar near three-week high as vaccinations quicken

reuters.com · 09/02/2021 02:23
Australia dollar near three-week high as vaccinations quicken

By Anushka Trivedi

- The Australian dollar held near three-week highs on Thursday as a step up in vaccinations and recent encouraging economic data gave investors hope tough COVID-19 curbs would be eased in coming weeks.

The Aussie dollar AUD=D3 stood at $0.7365, after rising 0.7% to resistance around $0.7384 overnight. Support lies around $0.7330 and $0.7285.

Data on Wednesday showed the Australian economy had avoided a technical recession in the second quarter, spurring gains in the local currency, while a record trade surplus for July added to the better background. nAZN0M1W00

"Positive momentum should continue for the AUD as economic data improves", ANZ Research analysts wrote in a note, adding that June quarter data affirmed domestic demand was solid and would rebound sharply once lockdowns were lifted.

That and a quicker vaccination rollout have helped markets mostly shrug off worries over a widely expected economic contraction in the September quarter.

There was some speculation the downturn could prompt the Reserve Bank of Australia (RBA) to delay tapering its bond buying programme at a policy meeting next week, though the market was split on the chances.

Yields on the Australian 10-year bond AU10YT=RR eased 3 basis points to 1.21%, after touching a five-week high in the previous session. That took them to 9 basis points below Treasury yields, compared to 5 basis points on Wednesday.

Victoria and New South Wales have brought forward their inoculation targets as lockdowns spurred a surge in demand, working in line with the Australian government's plan to reopen the economy if 70%-80% of the population get at least one dose. nL1N2Q401V

Also helping the Aussie this week was the expected flows from the country's iron ore majors BHP Group BHP.AX, Rio Tinto RIO.AX and Fortescue Metals Group FMG.AX as they pay a whopping A$32.4 billion in dividends to local investors.

The New Zealand dollar NZD=D3 was flat around $0.7062, after firming to $0.7072 earlier as local bond yields NZ10YT=RR hit a two-month peak.

The success of lockdowns in the country to bring down the virus tally has allowed a gradual easing of curbs, giving the Reserve Bank of New Zealand (RBNZ) more scope to tighten policy.

Markets now imply a 96% chance the RBNZ will hike rates by 25 basis points to 0.5% at its Oct. 6 meeting, with a 90% probability of a move to 0.75% by November. nL1N2Q406E


($1 = 1.3576 Australian dollars)


(Reporting by Anushka Trivedi in Bengaluru
Editing by Shri Navaratnam)

((Anushka.Trivedi@thomsonreuters.com; +918061823241;))