Australia, NZ dollars pause after 3-day rally

[WELLINGTON] The Australian dollar paused on Tuesday after soaring commodity prices propelled it to a two-week high, though it was still on track for its worst monthly performance since May.

The Australian dollar held steady at US$0.7487, following three consecutive sessions of gains.

Since the US presidential election on Nov 8 in which Donald Trump was victorious, the Aussie has lost 3.5 per cent as the greenback jumped in line with yields on Treasury bonds.

The Aussie is down 1.5 per cent so far this month, set to post its second straight monthly loss. Over the past week, however, it has held its own against the US dollar aided by a sharp rebound in the price of iron ore and coal - Australia's two largest exports.

"The Aussie dollar is looking like a beautiful oasis over the short term," said Stephen Innes, senior currency trader at Oanda Australia and Asia Pacific.

"Speculative Chinese monies remain the primary driver in base metals flows as the China retail crowd stockpile everything in sight ahead of the anticipated Trump fiscal boom."

Later in the day, investors will look to US third-quarter gross domestic product data as well as readings on consumer confidence and consumption for trading cues. They will be followed by the November payrolls report on Friday.

The Aussie also fared well elsewhere. It rose 0.2 per cent against the yen to stay near a seven-month peak.

It has risen in five out of the last six sessions against the yen, thanks to carry trades where investors borrow in low yielding currencies to invest in high-yielding assets.

Political risks kept the euro in check, as it fell 0.2 per cent against the Aussie to stay near a 1-1/2 year low touched this month.

Worries about Italy's banking system have been mounting ahead of a Dec 4 referendum on constitutional reform, which could unseat the government of Prime Minister Matteo Renzi.

The New Zealand dollar held steady at US$0.7079 after rising for three straight days.

Analysts, however, felt the balance of risks was leaning against the kiwi. "The US dollar has had an impressive rise since the US election and has potential to rise further during the months ahead," said Imre Speizer, a market strategist at Westpac.

"Against that, the NZ economy is strong and dairy prices have risen. Overall we are left with a bearish outlook for NZD/USD, targeting sub-US$0.70."

New Zealand government bonds inched higher, with yields down half a tick across the curve.

Australian government bond futures eased, with the three-year bond contract down three ticks at 98.080. The 10-year contract slipped half a tick to 98.3350.

REUTERS