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Australia dollar propped up by solid data; NZ$ slips

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The Australian dollar held above a recent two-week trough on Monday, helped by a solid rally in the price of iron ore, the country's top export, and positive economic data.

[SYDNEY] The Australian dollar held above a recent two-week trough on Monday, helped by a solid rally in the price of iron ore, the country's top export, and positive economic data.

The Australian dollar held at US$0.7603 from Friday's low of US$0.7551, a level not seen since Nov 21.

Data out on Monday showed Australian firms rebuilt inventories in the third quarter, adding around 0.2 percentage points to economic growth. The data also pointed to higher wages costs for employers, providing a welcome lift to household incomes.

Separate data showed job vacancies in the country were at a six-year peak, a sign that Australia's run of strong employment gains could last a while yet.

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"On balance the Q3 business indicators data were modestly positive," ANZ economist Felicity Emmett said in a note.

"These numbers make us feel comfortable forecasting a relatively strong +0.8 per cent quarterly in Q3 GDP, due for release on Wednesday."

Economists polled by Reuters expect Australia's gross domestic product (GDP) accelerated 0.7 per cent in the September quarter, taking annual growth to a solid 3 per cent.

The Aussie was also supported as Dalian iron ore futures jumped for a fourth straight session to the highest since mid-September.

Still, the Aussie failed to break above recent ranges as the US dollar towered above most major currencies after the passage of a Senate tax bill over the weekend.

The easing of fiscal stimulus could further boost corporate profits and force the Federal Reserve to tighten more quickly than anticipated, sending US Treasury yields sharply higher.

The Reserve Bank of Australia (RBA) will hold its last policy meeting of the year on Tuesday when it is widely expected to stay pat on rates. The central bank is expected to keep rates at or near record lows for some time to come due to tepid inflation, weak wage growth and rising household debt.

Across the Tasman Sea, the New Zealand dollar slipped 0.44 per cent to US$0.6859 against a rising greenback. The kiwi was edging closer to US$0.6781, the lowest since mid-2016.

The week will be dominated by a Reserve Bank of New Zealand governor speech on Tuesday on the implication of low inflation on monetary policy. Traders will also keep an eye on a fortnightly dairy auction due Wednesday.

New Zealand government bonds eased, sending yields four basis points higher at the long end of the curve.

Australian government bond futures eased, with the three-year bond contract and the 10-year contract down two ticks each at 98.030 and 97.4350 respectively.

REUTERS

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