SYDNEY: The Australian and New Zealand dollars resumed their charge toward their multi-month highs on Monday as news of more Chinese policy easing boosted commodity prices while their loss against Japan’s yen steadied.
The two were also buoyed by benign US inflation data that added to the case for outsized interest rate cuts from the US Federal Reserve, which sent risk assets higher.
The Aussie rose 0.2% to $0.6916, just a touch below a 20-month top of $0.6937 hit on Friday. It surged 1.4% last week, with bulls eyeing the next targets at $0.6949 and $0.7029.
It also gained 0.3% to 98.42 yen, resuming its climb against the Japanese currency which leapt 1.7% on Friday when Shigeru Ishiba, a former defence minister and erstwhile critic of aggressively easy monetary policy, won the leadership of the ruling party and therefore premiership of Japan.
The kiwi dollar rallied 0.5% to $0.6372, the highest since July 2023, in part helped by a private survey showing that business confidence jumped again in September.
Two-year swap rates bounced off a two-year low of 3.49% to be flat at 3.56%.
Over the weekend, China’s central bank ordered lenders to lower mortgage rates by the end of October.
A slew of mega cities such as Guangzhou, Shanghai and Shenzhen also dramatically eased home-buying restrictions.
That sent iron ore prices up an eye-watering 10% on Monday to more than $110 a metric ton - a boon for Australia whose resources industry has already helped the Labor government deliver a second consecutive budget surplus, at A$15.8 billion ($10.93 billion) for the year ending June 2024.
“AUD/USD could this week increase above 0.70 for the first time since February 2023,” said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia.
Australia, New Zealand dollars scale fresh highs on China boost
“The authorities in the world’s number two economy, China, have finally drawn a line in the sand by stepping up policy support and indicating more is coming.
The improved global economic outlook is a weight on the USD.“ Looking ahead, Chinese markets will be closed for a week-long holiday from Tuesday, a day on which Australia will publish retail sales data with analysts expecting a bounce of 0.4% after a flat outcome the prior month.
Data from CBA showed that consumers are choosing to use income tax cuts to pay down debt rather than to spend, a trend which adds weight to the argument against further monetary policy tightening.
Swaps imply a 78% chance that the Reserve Bank of Australia will lower the 4.35% cash rate in December.