Australia dollar camps near 3-month peak, NZD falls again

[SYDNEY] The Australian dollar held near a three-month high on the greenback on Wednesday, struggling to break above 77 US cents which is proving to be a major hurdle even as it scaled multi-month peaks on the yen and the euro.

The Australian dollar stood at US$0.7656, having reached US$0.7696 overnight to match a three-month high it made at the start of February.

The Aussie has traded in a sideways direction since the beginning of the month, and even though it has failed persistently at crucial chart resistance around US$0.7700, demand remains fairly solid.

The currency's resilience has come in the face of a strengthening US dollar which rose on Wednesday after Federal Reserve Chair Janet Yellen signalled a faster pace of US interest rate increases.

Traders await Australia's employment report for January due Thursday. Data so far has shown jobs growth skewed toward part-time work while unemployment is near a six-month high.

Some economist believe the slack in the labour market may force the Reserve Bank of Australia (RBA) to ease again, after cutting interest rates twice last year. The RBA has a neutral policy bias.

"If the Aussie survived Yellen's hawkish comments overnight, then perhaps a decent employment print could see it break the 77 cent level," said Matt Simpson, senior analyst at ThinkMarkets.

"Leading indicators suggest support for employment, so there is hope. However, the longer it fails to break this key level, the more likely a break below 76c becomes."

The Aussie kept its winning streak elsewhere, rising to a two-year high on the euro as traders pressured the single currency on uncertainties about France's presidential election and Greek bailout talks.

On the yen, the Aussie hit a more than one-year high, largely due to carry trades where investors borrow at low rates to invest in high-yielding currencies.

The New Zealand dollar fell for a third straight session to US$0.7165, near a 3-1/2 week low of US$0.7156 touched on Monday.

The kiwi was knocked off a three-month peak last week after the Reserve Bank of New Zealand signalled it could keep rates at record lows for two years, hosing down bets of a rate hike later in 2017.

If it remains down here, the kiwi will clock its second straight week of losses.

Analysts still expect the kiwi to find support from strong economic growth, thanks to robust migration and a revival in the price of milk, New Zealand's biggest goods export earner.

New Zealand government bonds eased, sending yield about five basis points higher at the long-end of the curve.

Australian government bond futures fell too, with the three-year bond contract down five ticks at 97.970. The 10-year contract slipped 5.5 ticks to 97.1750.

REUTERS