Australia, NZ dollars reach 4-month peaks as greenback stumbles

[SYDNEY] The Australian and New Zealand dollars racked up fresh four-month peaks on Monday as their US counterpart suffered broad-based selling while optimism over global growth underpinned commodity prices and risk trades.

The Aussie dollar firmed 0.25 per cent to a top of US$0.7937. Support now lies at a former chart barrier of US$0.7898, with resistance lining up at US$0.7940 and US$0.7976.

The rally in part reflects a marked improvement in domestic economic news over the last couple of months, including on employment, retail sales and home building approvals. Greg McKenna, chief market strategist at CFD and FX provider AxiTrader, noted a measure of whether data was beating market forecasts compiled by Citi had shot upward over the last month to reach its highest since 2015.

"That turn in the data unsurprisingly coincided with the turn in the Aussie," said McKenna, adding there was a "growing chorus" suggesting interest rates would start rising this year.

Futures markets imply a rate hike is now a 50-50 chance by August, with a move to 1.75 per cent fully priced in by December.

Australian jobs figures for December are due on Thursday and another upbeat result would likely see the odds narrow further.

Median forecasts are for a rise of around 15,000 in employment with the jobless rate staying at 5.4 per cent.

The New Zealand dollar was firm at US$0.7270, after reaching the highest since late September at US$0.7282. Support came in at US$0.7220 with resistance around US$0.7340.

The Kiwi had briefly dipped to US$0.7231 mid-morning when weaker-than-expected food price data pointed to tepid inflation in the fourth quarter.

The currency has risen 2.2 per cent since the start of the year and was in need of consolidation.

"The NZD has started to see a little more two-way action at these elevated levels. It seems likely to continue to explore its options around these levels for a bit," said Sharon Zollner, chief economist at ANZ Bank, in a research note.

The first major local economic news for the year, think tank NZIER's fourth quarter survey of business opinion, is due out on Tuesday. Analysts expect business confidence to improve as an initial third-quarter surge in pessimism towards the new Labour-led government wore off.

New Zealand government bonds eased, sending yields 2 basis points higher at the long end of the curve.

Australian government bond futures eased a touch, with the three-year bond contract off 1.5 ticks at 97.815. The 10-year contract dipped 2 ticks to 97.2250.

REUTERS