The Australian dollar held near four-month peaks on Tuesday as the country's central bank stepped up warnings about overheating in the housing market, leading investors to pare the already scant chance of a further cut in interest rates. The Aussie was standing at $0.7710 after reaching $0.7748 overnight, which was the highest since early November when it got as far as $0.7778.
A break of November's barrier would put it in territory not visited since April last year and set up a push to the next chart target around $0.7836. That also makes these levels extremely tough resistance, which could be hard to pierce. The gains have mostly been driven by broad weakness in the US dollar after the Federal Reserve emphasised further tightening would be gradual following its rate hike last week. The New Zealand dollar was a shade softer at $0.7045 after touching a two-week peak at $0.7080 overnight.
New Zealand government bonds gained, sending yields 1.5 basis points lower. Australian government bond futures were little changed. The three-year bond contract was flat at 97.950, while the 10-year contract added 1.5 ticks to 97.1500. The Reserve Bank of Australia (RBA) is nowhere near raising rates itself, but any chance of a cut has vanished as it highlighted risks in the local housing market.
Minutes of its March policy meeting out Tuesday showed housing was very much on the mind of board members. "The language around the housing market conveyed a sense of increased concern over the medium-term risks emerging from rising prices, increasing supply, and weak rental returns," said Su-Lin Ong, a senior economist at RBC Capital Markets.