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[SYDNEY] The Australian dollar staged an impressive rebound on Monday, after slumping as much as a cent following the country's weekend election that produced no clear winner.
The Aussie, which skidded as far as US$0.7410, was back flirting with 75 cents and flat on the day. Against the yen, it was at 77.00, well off an early low of 76.22.
Lifting the mood, both Moody's and Fitch said there was no immediate threat to Australia's top notch triple-A rating despite a political stalemate that could take days if not weeks to clear.
Both agencies said they wanted to see how the new government, when formed, would manage public finances. Moody's said it still expected fiscal consolidation to remain a key policy objective.
"AUD has done well to retest the 75 handle, but we are sceptical of lack of volume behind the move," said Matt Simpson, senior market analyst at ThinkForex. "A hung parliament will likely provide choppy trading at best with potential to weigh on the dollar."
The next focus is Tuesday's policy review by the Reserve Bank of Australia (RBA). Almost all of the 37 economists polled by Reuters last week expect the central bank to keep the cash rate at a record low 1.75 per cent.
The Aussie also recovered from a one-year trough against its New Zealand peer, rising to NZ$1.0438 from NZ$1.0371.
Versus the greenback, the kiwi was up 0.1 per cent at US$0.7180, well above its recent lows of US$0.6975.
Stuart Ive, private client manager for OM Financial Ltd, said the kiwi is likely to tread water given political uncertainty across the Tasman Sea, a dearth of domestic developments and a U.S. holiday on Monday.
The biggest data release for New Zealand is the GlobalDairyTrade auction overnight on Tuesday. "Milk futures suggest the index will return a similar flat to lower result this week which given the levels of the TWI, can only be bad news for the dairy sector," said Ive.
New Zealand government bonds gained, sending yields 2 basis points lower across the curve.
Australian government bond futures were a tad softer, with the three-year bond contract 3 ticks lower at 98.510.