The Australian dollar climbed to a two-week high on Tuesday on greater optimism about the country's economic outlook after a gauge of business conditions rose to a record, while the New Zealand dollar added to two straight sessions of gains. National Australia Bank's index of business conditions rose in February to the highest reading since the survey began in 1997, with the strength in activity broad-based across major industry groups.
The reading cheered traders who took the Australian dollar to $0.7885, a level not seen since February 26. Technical chart resistance lies at $0.7893, and a breach above could see it testing $0.8000. The Australian and New Zealand dollars tend to perform well when global risk appetite is strong, led by carry traders where investors borrow in low-yielding currencies such as the yen or the euro to invest in higher returning assets.
The New Zealand dollar added 0.2 percent to $0.7311, not far from Monday's $0.7323, which was the highest since February 26. New Zealand government bonds eased, sending yields 4 basis points higher at the long end of the curve.
Australian government bond futures were barely changed, with the three-year bond contract flat at 97.850. The 10-year contract inched half a tick higher to 97.1950. "The record level for the business conditions index indicates that business activity in Australia is robust," NAB chief economist Alan Oster said.
"Forward orders have been on a rising trend for several years now signalling an improved outlook for the non-mining economy," Oster added. "Similarly, capacity utilisation is trending higher, which is a positive for both future investment and employment." The survey helped lift spirits after official data out last week showed the economy hit a speed bump in the December quarter.
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