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Australian dollar holds gains after RBA, coronavirus lockdowns a concern

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The Australian dollar held recent gains on Tuesday as a rise in Chinese stocks supported risk appetite globally, while Australia's central bank kept rates at record lows amid a worrying rise of coronavirus cases in the country.

[SYDNEY] The Australian dollar held recent gains on Tuesday as a rise in Chinese stocks supported risk appetite globally, while Australia's central bank kept rates at record lows amid a worrying rise of coronavirus cases in the country.

The Aussie was steady at US$0.6970 having earlier touched a three-week top of US$0.6998. The next major chart target is June's peak of US$0.7069, while support lies at US$0.6950 and US$0.6900.

The Reserve Bank of Australia (RBA) ended its monthly policy meeting by keeping interest rates at 0.25 per cent as expected and reiterating it stood ready to ease further if needed.

The bank again noted the economic downturn in Australia was likely to be less dire than first feared, but also cautioned the outlook for activity and the virus was uncertain.

One stumbling block has been a renewed outbreak of the coronavirus in Victoria which has seen lockdowns in some suburbs of Melbourne and the closure of the border with New South Wales.

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"The lockdown of large swathes of suburban Melbourne and the closure of the state border are a setback to hopes for a quicker re-opening of Australia's second largest economy," said Ryan Felsman, a senior economist at CommSec.

"The virus hit to tourism, international education and migration has already been pronounced, and the impact on consumer spending is evident."

ANZ reported spending on its cards was still up a strong 5.2 per cent in the week to July 3, compared to a year ago, but growth in Victoria was starting to lag other states.

The RBA has committed to keeping three-year bond yields near 0.25 per cent for some years to come, and so far have had little trouble doing so.

The bank has bought no bonds through tender for more than two months now, though it is buying bonds outright in its regular money market operations.

Yields on 10-year debt were steady at 0.92 per cent having held between 0.895 per cent and 0.977 per cent for three weeks now.

The kiwi dollar held at US$0.6550, just short of the recent five-month top of US$0.6585. Support stands at US$0.6533 and US$0.6510.

Like the Aussie, the kiwi has benefited from dogged market optimism on the world economy which has driven up asset prices across the globe, helping it clear chart resistance.

"NZD/USD broke above a month-old contracting range at US$0.6500, signalling a move to US$0.6585 during the next day or two, and potentially to US$0.6700 multi-week," said analysts at Westpac.

REUTERS

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