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Australia, NZ dollars rise on risk appetite, yen slumps vs kiwi

Thursday, December 8, 2016 - 11:13

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The Australian and New Zealand dollars rose against their US counterpart on Thursday as buoyant equities whetted risk appetites, sending the yen to an 11-month low against the kiwi.

[SYDNEY] The Australian and New Zealand dollars rose against their US counterpart on Thursday as buoyant equities whetted risk appetites, sending the yen to an 11-month low against the kiwi.

The Australian dollar edged up to US$0.7490, from a trough of US$0.7417 touched on Wednesday. It has proved resilient to two sets of surprisingly weak data at home, including a A$1.5 billion (S$1.59 billion) trade deficit.

On Wednesday, figures showed the economy shrank for the first time since 2011, raising the possibility of a recession following 25 years of uninterrupted growth.

Yet prices for Australia's major resource exports, including iron ore and coal, are on a bull run thanks to demand from China.

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Market voices on:

"The Aussie is more influenced by the trend in commodity prices than the pace of economic growth," said Elias Haddad, a senior strategist at Commonwealth Bank of Australia.

"That's why it shrugged off the very weak gross domestic product reading."

Interbank futures imply scant chance of another rate cut in the next few months.

The Aussie managed to briefly pierce stiff resistance at 75 US cents to reach the highest level in three-weeks. A sustained break above that, would open the door to the 50 per cent retracement of the November move around US$0.7550.

The Aussie held near seven-month peaks against the safe haven yen around 85, while its kiwi neighbour emerged as the clear outperformer.

It climbed to 82 yen, a top not seen since early January. A break above 82.34 would be this year's high.

Against the US dollar, the kiwi sped up to US$0.7200 , from US$0.7154 early, having touched a one-month peak of US$0.7212 on improving appetite for risk assets.

Also helping were upbeat comments on the economic outlook from the Reserve Bank of New Zealand, which were echoed by Treasury in its half-year fiscal review.

The kiwi has gained nearly one per cent this week, having weathered a prospective change in government leadership.

Finance Minister Bill English is expected to be the country's next Prime Minister, following the shock resignation of John Key on Monday.

New Zealand government bonds rose, sending yields as much as five basis points lower along the curve.

Australian government bond futures extended gains, with the three-year bond contract up one tick at 98.100. The 10-year contract rose 5.5 ticks to 97.2900 in a bullish flattening of the curve, while the 20-year contract rose four ticks to 96.6100.

REUTERS

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