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Australia dollar firm on sturdy bond demand, kiwi near 2-1/2 month lows

Wednesday, October 12, 2016 - 12:00
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The Australian dollar inched up from a three-week low on Wednesday boosted by strong demand from investors for a long-term government bond sale, in a sign of solid appetite for the country's high-yielding assets.

[SYDNEY] The Australian dollar inched up from a three-week low on Wednesday boosted by strong demand from investors for a long-term government bond sale, in a sign of solid appetite for the country's high-yielding assets.

The Australian dollar rose 0.5 per cent to US$0.7579. It fell 0.9 per cent on Tuesday, its biggest daily percentage drop in a month as the greenback jumped on rising expectations of an interest rate hike by the Federal Reserve.

But local sentiment got a fillip as books closed for the Australian's government's new 2047 bond with bids in excess of A$13 billion (S$13.5 billion). That blew away expectations of bids totalling around A$2 billion to A$3 billion.

Australia, one of only a dozen countries rated triple-A by S&P and Moody's, has A$443 billion of bonds on issue. Around 60 per cent of that debt is in the hands of international holders.

While the Aussie ran past chart resistance at US$0.7560, analysts were wary ahead of minutes of the Fed's September meeting, due later in the day.

"Whilst we remain dubious of any solid gain on AUD, we think it could remain supported over 75 US cents following the minutes," said Matt Simpson, senior analyst at ThinkMarkets.

Also helping sentiment was a rebound in sterling after dramatic losses in the previous session.

The pound benefited from a Bloomberg report that British Prime Minister Theresa May has accepted that Parliament should be allowed to vote on her Brexit plan.

Elsewhere, the Aussie rose against its New Zealand cousin for the third straight session to NZ$1.0745. It was also up on the Japanese yen, but slipped on the pound after four consecutive days of gains.

The New Zealand dollar pushed higher on Wednesday to US$0.7093, but stayed near a 2-1/2 month low touched in the previous session.

The kiwi skidded on Tuesday after the country's central bank warned that further policy easing would be needed to push inflation higher.

New Zealand government bonds gained, sending yields 1 basis points lower at the short end of the curve.

Australian government bond futures eased, with both the three-year and the 10-year bond contracts down 3 ticks at 98.31 and 97.750 respectively.

REUTERS

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