The Australian and New Zealand dollars notched broad gains on Monday as rising bond yields at home sucked investor funds away from low-yielding currencies, notably the Japanese yen. The Australian dollar firmed 0.3 percent to $0.8028, but still faces resistance above $0.8050 having repeatedly failed to sustain breaks higher. The move was largely a function of demand against the yen where the Aussie had climbed 0.6 percent to 89.24 and was challenging July's double top at 89.33 and 89.42.
A breach there would open the way to a peak from December 2015, when it got as far as 90.71. The kiwi has likewise surged over three yen in just six sessions to touch 81.50 and still has room to make up to reach the July peak of 83.91. Yields on Australian 10-year bonds have climbed almost 20 basis points in just the past seven sessions to reach 2.80 percent, their highest since March. The shift has even outpaced the rise in US Treasury yields, fattening the Aussie's rate advantage. That is far above the paltry 0.02 percent paid by Japan's 10-year paper, which is unlikely to change anytime soon given the Bank of Japan is widely expected to reaffirm its massive asset buying campaign at a policy meeting on Thursday.
The New Zealand dollar also gained almost 0.5 percent on its US counterpart to reach $0.7325. Chart resistance at $0.7330 could be hard to overcome ahead of an election on September 23. New Zealand government bonds eased, sending yields 6 basis points higher along most of the curve. Australian government bond futures slipped, with the three-year bond contract down 5 ticks at 97.810. The 10-year contract lost 5.75 ticks to 97.1700.
Australian yields were driven higher in part by surprisingly strong job figures last week that led markets to price in a greater chance of a hike in interest rates by the Reserve Bank of Australia (RBA), although not for some months yet.
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