SYDNEY: The Australian dollar broke past the psychologically important level of 70 cents on Monday, buoyed by a retreat in the safe-haven US dollar, higher commodity prices from China’s rapid reopening and signs that global inflation has peaked.

The Aussie hit an intraday high of $0.7019, its highest since Aug. 17, after having advanced 1.4% last week to as far as $0.6994.

It now faces major resistance at the August top of $0.7136 and May top of $0.7283. The kiwi dollar was up 0.4% to $0.6417, the strongest level in a month. Its bull target remains $0.6513, last hit in December and the highest since June.

Joseph Capurso, a senior currency strategist at Commonwealth Bank of Australia, expects the Aussie dollar to head towards $0.71 this week, led by a weaker greenback, while ignoring any downside surprise to China’s economic data due on Tuesday.

“USD should continue to ease against most currencies this week with the possible exception of the JPY,” said Capurso.

China is expected to report its fourth-quarter gross domestic product figures on Tuesday, with economists polled by Reuters seeing growth likely slowed to 1.8% in the last quarter from 3.9% previously.

Even with a likely bumpy few months before growth bounces back strongly, China’s reopening will help Australia’s economy avoid recession through the removal of trade curbs on Australian goods and the return of Chinese students and tourists, said Su-Lin Ong, chief economist at RBC Capital Markets.

Australian dollar holds firm as robust data add to rate case

“These considerations strengthen our view that AU is likely to avoid recession in 2023 in contrast to much of G10 and indeed, they suggest some upside risk to our 2023 GDP forecast of 1.5%,” said Ong.

Investors are also waiting nervously to see if the Bank of Japan will defend its super-sized stimulus policy at a pivotal meeting on Wednesday, which could drive big moves in the cross flows between the Aussie and Japanese yen.

The Aussie gained 0.4% to 89.5 yen on Monday.