Australian dollar inches higher on profit data, NZD in a rut

[SYDNEY] The Australian dollar edged higher on Monday after data showed surging commodity prices led to record-breaking company profits in the fourth quarter, a boon for the country's trade balance and national income.

The Australian dollar rose about 0.3 per cent to US$0.7688. The Aussie has been trading in a sideways direction since the beginning of February, facing stiff resistance at 77 US cents.

It has breached that level six times over the last two weeks but has failed to stay above it. The last time it failed at that barrier in November, it came tumbling down to US$0.7163.

"The reality is the Aussie needs more good news at the moment," said Greg McKenna, chief market strategist, AxiTrader.

"It's just the latest reminder to the bulls that above 77 US cents is where the danger lies."

Monday's data from the Australian Bureau of Statistics showed company profits increased by a larger-than-expected 20 per cent in the fourth quarter, driven by the mining sector.

That is a positive outcome for Australia's A$1.6 trillion (S$1.73 billion) annual economic output, data for which is due March 1.

"Analysts expect a big snapback in GDP growth driven by export volumes," said Joseph Capurso, currency strategist at Commonwealth Bank.

"Australia's current account deficit will plunge to less than one per cent of GDP, lowest since mid-70s, because of the surge in commodity prices. A small current account deficit will support AUD valuation, especially if volatility returns."

Elsewhere, the Aussie rose 0.3 per cent on its New Zealand cousin and 0.2 per cent on the yen. The euro grinded lower to stay near its lowest in more than three years.

The New Zealand dollar was subdued on Friday, falling for a second straight session. The kiwi hovered around US$0.7200, the middle of its recent US$0.7130/7246 range.

"The NZD continues to range trade, with no strong rationale emerging to either sell or buy it," ANZ economists said in a research note.

"We still believe the NZD/USD is biased lower over time, with prospective US interest rate hikes lending support to the USD," they added.

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

Australian government bond futures rose, with the three-year bond contract up one tick at 98.020. The 10-year contract added 3.5 ticks to 97.2750.

REUTERS