SYDNEY: The Australian dollar held overnight gains on Tuesday, helped by higher iron ore prices and carry demand against the yen, while the kiwi hit a two-week high ahead of the Reserve Bank of New Zealand’s policy meeting this week.
The Aussie was steady at $0.6608, after gaining 0.4% overnight to close above the 66 cent level for the first time in four weeks. Prices for iron ore, the biggest Australian export, jumped 5%, extending Monday’s gains of over 3% and helping sustain a bullish bias for the currency.
It faces resistance at last week’s high of $0.6619 and March’s high of $0.6667.
The New Zealand dollar climbed as far as $0.6049, the highest in two weeks, as traders positioned themselves ahead of Wednesday’s central bank meeting, at which its key interest rate is expected to remain unchanged, a Reuters poll showed.
It rose 0.3% overnight, while resistance is at the 200-day moving average of $0.6067.
Australia, NZ dollars get a respite, bonds get a beating
The Aussie was also buoyed by carry trades as investors borrowed the Japanese yen at zero rates to buy higher yielding currencies. It hit a fresh nine-year peak of 100.42 yen on Tuesday, having climbed 0.5% overnight.
The dollar, however, ran into some resistance against the kiwi, and was down 0.2% to NZ$1.0928, after surging 4% in just a little over a month as markets moved to price in a more aggressive rate cutting cycle in New Zealand.
Recent economic weakness in New Zealand, including a survey on Tuesday showing that business confidence dipped further in the first quarter, has bolstered bets that rate cuts would start in August.
Nomura on Tuesday closed their long position in the Australian dollar against the kiwi.
“If the RBNZ is uncomfortable with current market pricing, the governor could easily deliver messaging which pushes back against that pricing. We think this could particularly be the case,” said Andrew Ticehurst, an economist at Nomura.
In Australia, consumer mood darkened again in April amid heightened economic worries, although business conditions held steady in the face of decade-high interest rates, mixed results that offered little direction for the currency.