NZ, Australian dollars regain ground on firmer commodities, China

[SYDNEY] The New Zealand and Australian dollars got a bit of their mojo back on Monday when some commodity prices firmed and perceptions of China's economic health brightened.

The New Zealand dollar rallied to US$0.6876 from US$0.6853 early on as much better-than-expected retail sales data encouraged investors.

Retail sales volumes rose a seasonally adjusted 1.5 per cent in the three months to end-March, data from Statistics New Zealand showed, handily topping analysts' expectations of a 0.9 per cent rise.

Investors were now waiting comments by the Reserve Bank of New Zealand's assistant governor John McDermott at 0500 GMT.

"We expect that McDermott will use this speech to ram home the Bank's message that a 1.75 per cent official cash rate is here to stay for a considerable period," Kiwibank economists said in a research note.

The central bank surprised markets at its policy meeting last week, adopting a more dovish tone than many had expected and warning that New Zealand's strong economic indicators, particularly inflation, might not have as much momentum as economists and markets thought.

The Australian dollar edged up to US$0.7400, from US$0.7385 early and away from a four-month trough of US$0.7329.

Resistance was found at US$0.7421.

The Aussie was underpinned by iron ore prices firming following a sharp retreat, combined with receding concerns over China.

The iShares MSCI Emerging Markets exchange-traded fund, which tracks the investment results of an index of large- and mid-cap emerging market stocks, was at a two-year peak - easing worries about China's economic health.

China is Australia's top export market and iron ore, which China buys in vast amounts, is Australia's largest export earner.

Also helping was a large number of Aussie long positions. Data released by Commodity Futures Trading Commission data released on Friday showed speculators are net long 25,781 contracts.

The market was unmoved by Australian data showing a drop in housing finance, and a missile test by North Korea at the weekend.

Australian government bond futures rose, with the three-year bond contract up two ticks at 98.170. The 10-year contract gained 4.5 ticks to 97.3800, while the 20-year contract was steady at 96.2150.

New Zealand government bonds gained, sending yields three basis points lower at the long end of the curve.

REUTERS