The Australian dollar steadied near a two-year peak on Monday, on track for its best monthly performance since January, while its New Zealand counterpart was set for a third straight month of gains. The Australian dollar stood at $0.7982, not far from $0.8066 touched on Thursday - its highest since May 2015. The Aussie climbed about 0.9 percent last week and has added 3.8 percent this month so far.
Underpinning sentiment were solid data on the Chinese economy and an 8 percent jump in futures for iron ore, Australia's single biggest export earner. The currency's uphill trek was partly interrupted by the Reserve Bank of Australia (RBA), which last week emphasised the need for policy rates to stay at record lows.
The New Zealand dollar held at $0.7510, not far from a two-year high of $0.7557 hit on Thursday. It rose 0.9 percent last week, and is on track for its third straight monthly win, poised to gain 2.4 percent in July. New Zealand government bonds slipped, sending yields 2-2.5 basis points higher at the long end and 5 basis points higher across the short end of the curve.
Australian government bond futures were mixed, with the three-year bond contract up 1 tick at 98.040. The 10-year contract eased half a tick to 97.3100. The RBA will hold its monthly policy meeting on Tuesday, at which it is widely expected to keep rates at 1.50 percent after last easing a year ago.
"The Aussie moves have been nothing short of incredible, but we should be in for a well overdue consolidation phase," said Stephen Innes, head of trading APAC at OANDA. At 80 US cents, the Australian dollar "is looking very expensive especially in the wake of Governor Philip Lowe's speech which cut short any domestic rate hike expectation," Innes said.
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