The Australian dollar stood near a 2-1/2 month peak on Monday aided by upbeat economic data and as the price of iron ore – the country’s No. 1 export earner – steadied following steep falls in recent weeks. A weakening greenback helped support the Australian dollar, as well as its New Zealand counterpart which was within a whisker of a 4-1/2 month high on Monday. The Aussie held at $0.7623, not far from $0.7640 – a level last seen on April 3. The New Zealand dollar stood at $0.7287 from a high of $0.7320 touched last week.
“AUD/USD will remain firm this week as the USD consolidates and iron ore prices appear to be forming a base,” said Elias Haddad, senior currency strategist at CBA. The U.S. dollar index fell 2.1 percent in May and is mostly unchanged so far in June. “This week’s AUD highlight is the RBA June meeting minutes on Tuesday.” The Reserve Bank of Australia (RBA) has held interest rates at a record low 1.50 percent after last easing in August 2016, sounding optimistic about the economy despite a slow start to the year.
RBA governor Philip Lowe on Monday expressed confidence economic activity will gain momentum, citing a recovery in global growth, upbeat surveys of local business sentiment and strength in employment. Australia’s economy expanded by a disappointing 0.3 percent in the first quarter of the year, while annual growth was the slowest since 2009 at 1.7 percent. However, recent data is pointing to a rebound.
Australia’s jobless rate is at a four-year low while forward-looking indicators of business confidence and conditions have generally been positive in recent months. Data out on Monday showed new vehicle sales surged to the highest on record in May.
Across the Tasman Sea, investors will watch out for the Reserve Bank of New Zealand’s rate decision on Thursday. The RBNZ was all but certain to keep rates at a record low 1.75 percent. “We expect the RBNZ won’t be pleased with the recent rebound in the exchange rate, and we expect to see some step up in language around the currency again,” said Kiwibank economists in a research note.
The currency has risen against the greenback by more than 6.5 percent since the start of May. New Zealand government bonds eased, sending yields as much as 3.5 basis points higher. Australian government bond futures slipped, with the three-year bond contract and the 10-year contract down 1 tick each to 98.180 and 97.54 respectively.