Australia, NZ dollars edge up on commodity rally

[SYDNEY] The Australian and New Zealand dollars edged up on Monday, helped by a rally in commodities, but gains were muted by a rising yen.

The Australian dollar rose to US$0.7566, having slipped 1.6 per cent last week in the second-largest weekly loss this year.

It has dropped around two US cents since touching a nine-month peak of US$0.7723 late March with much of the retreat due to a steep rise in the yen.

Many investors were caught by surprise last week when short-covering rippled through all the yen crosses with the Aussie losing nearly 5 per cent. It traded at 81.43 yen, not far from a one-month low of 80.64.

Likewise, the New Zealand dollar stood at 73.45 yen , having touched 73.16 last week, a level unseen since August last year.

The Aussie and kiwi dollars have shed between 7 and 10 per cent against the yen this year, although according to ANZ Bank, purchases of Australian dollar assets in February were the largest since July 2015.

"The continued easing of monetary policy in Japan over the last quarter, which has driven domestic yields to record lows, has increased the flow of Japanese investment money to foreign markets," it said.

Indeed, Australian government two-year bond yields of 1.8 per cent compare with a cost of 0.2 per cent in similar Japanese securities.

The New Zealand dollar rose 0.2 per cent to US$0.6811, from a low of US$0.6773 touched on Friday, benefiting from improving oil prices.

It fell 1.6 per cent last week.

Looking ahead, ANZ Bank said the main focus this week will be on China data, which kicked off with a benign reading on consumer price inflation on Monday.

New Zealand government bonds eased, sending yields around three basis points higher across the curve.

Australian government bond futures were quiet near one-month highs, with the three-year bond contract steady at 98.210.

The 10-year contract dropped half a tick lower at 97.5950, while the 20-year contract eased one tick to 97.0100.

REUTERS