The New Zealand and Australian dollars held hefty gains on Wednesday courtesy of surging commodities and robust global economic data, with the market paying little attention so far to a massive cyclone heading for Queensland. In late trade the Australian dollar was enjoying the view at $1.0122, after climbing 1.5 percent on Tuesday to as far as $1.0149, the highest since January 4.
Its rally from a low of $0.9864 on Monday caught the market in a vicious short squeeze and which now has would-be bears reluctant to sell again. "It's a symptom of risk environment," said Robert Rennie, chief currency strategist at Westpac. "We have a number of metals doing particularly well; we had fresh record high for tin; the US ISM at highs since May 2004; the UK PMI was the highest in a 20 year history."
The boom in export earnings is boosting profits, investment, employment and incomes and is a major reason the RBA is still likely to lift interest rates again in coming months, despite the drag from floods and cyclones. Support for the Aussie was seen from its January 24 high of $1.0023, with the currency now set to test resistance at $1.0152 and $1.0183.
The New Zealand dollar has also been buoyed by commodity prices with prices at its latest dairy auction soaring 7.2 percent - a level that will benefit the country's farmers. The NZ dollar was firm around $0.7812, after powering to a two-month high of $0.7823 overnight. The kiwi also edged up on the Aussie to NZ$1.2929, from NZ$1.3004 on Tuesday.