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Australia, NZ dollars hit wall on US$, near multi-month peaks on yen

Tuesday, July 11, 2017 - 10:59

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The Australian and New Zealand dollars were stuck in a rut against their US counterpart on Tuesday, but stood near multi-month highs on the Japanese yen as traders remained focused on divergent monetary policy globally.

[SYDNEY] The Australian and New Zealand dollars were stuck in a rut against their US counterpart on Tuesday, but stood near multi-month highs on the Japanese yen as traders remained focused on divergent monetary policy globally.

The Australian dollar held at US$0.7602, well off the recent high of US$0.7712. The Aussie had barely moved on Monday, ending that session at US$0.7607.

"After nearly a decade of loose monetary policy, global central banks are looking to turn down the music at the global bond party that has raged on well past its expected shelf life," said Stephen Innes, senior trader at Oanda.

"Despite this growing sense of reality setting in, traders remain tied up in knots fearing inflationary data surprises."

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Trading volumes were below June's average daily turnover as traders awaited comments from Federal Reserve Chair Janet Yellen for fresh cues on policy direction. The Bank of Canada is due to meet on Wednesday when it is expected to hike interest rates for the first time in almost seven years.

"Perhaps the tepid volumes are reflecting reduced summer positioning, a lack of interest or a bit of both. However, that tune will change as we move deeper into a potentially dangerous trading week," Mr Innes added.

Locally, a measure of Australian business conditions climbed to its highest since early 2008 in June as sales and profits picked up across a range of industries, another sign the economy had regained its feet after stumbling early in the year.

Yet markets are pricing in almost zero chance of a rise in local rates this year, with the Reserve Bank of Australia (RBA) determined to remain on hold for a long time.

Joining the RBA in its easy policy stance was the Bank of Japan which last week offered to buy an unlimited amount of bonds to ensure yields stay low.

The Aussie held at 86.89 yen having touched a four-month peak of 86.96 yen last week. The next target is the 88.17 top hit in February and a break there would take it to territory not visited since late 2015.

The New Zealand dollar stood near its highest in more than five months against the yen.

Against the greenback though, the kiwi eased to a three-week trough of US$0.7235 from a recent five-month peak of US$0.7347.

The data calendar was thin in New Zealand.

Electronic retail card spending was unchanged in June as high hospitality spending, buoyed by a rugby tour in the country during that time, was offset by low fuel prices.

New Zealand government bond prices were mostly higher, with the 10-year yield down one basis point on the day at 3.04 per cent.

Australian government bond futures were mixed, with the three-year bond contract down one tick at 97.970. The 10-year contract was unchanged at 97.2600.

REUTERS

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