SYDNEY: The Australian and New Zealand dollars nudged ahead on Monday, urged on by sky-high commodity prices and speculation Australia’s central bank could sound less dovish at its policy meeting this week.

The Aussie was firm at $0.7506, and not far from its recent five-month top of $0.7540. A break above the peak from last October at $0.7555 is needed to extend the bull run, while support lies around $0.7456.

The kiwi dollar was trailing at $0.6923, having repeatedly failed to crack resistance in the $0.6990/7000 zone. Support lies at the 200-day moving average of $0.6910.

Commodities remain a positive with the Reserve Bank of Australia’s (RBA) index of prices jumping over March to be up 41% on a year earlier.

“We judge AUD/USD is significantly undervalued thanks to the surge in commodity prices,” said Joseph Capurso, head of international economics at CBA, who estimates fair value at north of $0.8500.

“This week’s RBA meeting could be a catalyst for a lift in AUD if the RBA removes its “patient” narrative for increases in its cash rate,” he added.

The RBA Board meets on Tuesday and is expected to hold rates at 0.1% but also acknowledge that the economy continues to surprise with its strength.

Unemployment hit 4.0% in February months ahead of the RBA’s forecasts, making it harder to justify keeping rates at emergency lows. Data out Monday showed job ads at their highest since 2008, pointing to further gains ahead.

The market has long wagered the RBA will have to start hiking as soon as June and has priced in six more moves to 1.75% by year end.

Three-year bond yields shot up 87 basis points last month to reach 2.385%, while the spread with 10-year yields shrank to 41 basis points.

That was the flattest curve since early 2020 before the pandemic hit, though it is still some way from inverting as the US Treasury curve has.