The Australian dollar rose on Monday after stock markets around the world hit their best levels so far this year, lifting demand for riskier assets while knocking bond futures lower. The Australian dollar climbed over a cent to $0.8387, from $0.8247 seen here late Friday. It jumped over 2 yen to 79.56, from Friday's 77.23.
"We continue to see further gains in the Aussie to $0.8600 given better news on global and domestic economic growth," National Australia Bank said in a note to clients. Investors were in a perky mood on Monday, with Asian stocks up across the board and the MSCI index of world shares at a 10-month high after an upbeat US housing report pushed US stocks to 2009 peaks on Friday. Comments from Federal Reserve Chairman Ben Bernanke that a global economic recovery is at hand helped the market mood as well.
Investors have turned bullish on the Aussie on the view an upturn in the global economy will lift demand for the country's key commodity exports, and foreign exchange earners, such as iron ore and wheat. The latest data from the Commodity Futures Trading Commission showed currency speculators still hold a bigger net long position in the Aussie than any other currency, though the positions have been pared slightly.
Aussie bond futures tumbled as optimism over global economic prospects tempered safe-haven bids. Three-year bond futures slid 0.17 points to 94.96, the sharpest one-day drop in over two months. Ten-year bond futures eased 0.14 points to 94.465, the biggest daily fall in about a month.
Cash bonds were sold off as well, causing a spike in yields. One-year yields climbed to a near nine-month high of 3.99 percent, just short of a peak of 4 percent hit on August 11. Three-year bond yields jumped to 4.93 percent, the biggest daily rise in a month, but still well under a 10-month high of 5.15 percent hit on August 10.
Over the longer term, the market may find support after the Australian government said on Friday it had removed interest withholding tax on government bonds. The move, widely expected after the government flagged it in last year's budget, could boost overseas demand for bonds and support the Aussie at the margins.
But Gavin Stacey, a Westpac analyst in New York, said any boost in the medium term may be limited as central banks are the biggest holders of Australian government bonds and they are already tax exempt. "That said, we do expect the interest withholding tax announcement to impart a curve flattening bias," Stacey said.
Comments
Comments are closed.