SYDNEY, Feb 25 (Reuters) – The Australian and New Zealand dollars rose to multi-year peaks on Thursday as the global rush into a reflex game swung commodity prices and bond yields sharply in their favor.
The Aussie is enjoying cleared air at $ 0.7960, having hit an unvisited high since early 2018 of $ 0.7979. It is up 1.2% on the week as momentum funds pile up on the break of major chart barriers, particularly against the yen and euro.
The next targets are the psychological 80 cents level and the January 2018 peak of $ 0.8136.
The kiwi dollar rose to $ 0.7430, clearing 2018 peaks to hit levels not seen since August 2017. The next major target is the all-year 2017 peak of $ 0.7557, and a break there will take it to levels last visited in mid 2015.
“For Australia, the combination of rising commodity prices and viable export volumes means that resource-related export revenues have been healthy,” said CBA Australia’s chief economist, Gareth Aird.
“Prices are expected to remain high and that will produce a large sustainable trade surplus which will support the Australian dollar.”
Miners have already paid bumper tax and dividends in Australia, so convert the US dollars earned into Australian dollars.
The reflective trading has combined with upbeat economic data at home to drive the big gains in bond yields far beyond those seen in the US.
Australia’s 10-year yield surged up to 1.705%, the highest since May last year and surged 29 basis points this week alone. The spread on Treasuries expanded to 30 basis points, from zero a few weeks ago.
The Reserve Bank of Australia (RBA) stepped in on Thursday to buy A $ 3 billion in 2023-2024 bonds aimed at stopping the three-year yield from rising further above its 0.10% target.
It had limited success dragging the three-year yield to 0.14%, from a high of 0.168%.
In New Zealand, the 10-year yield has rocketed 33 basis points so far this week to hit 1.865%, the biggest weekly gain since 2013.
The Reserve Bank of New Zealand (RBNZ) on Wednesday pledged to be patient on policy and not tighten for some time, although noting that global moves in yields were beyond its control.
The country’s government has also recently mandated the RBNZ’s payroll account for house prices when setting policy, a tricky task given the record low prices have seen prices soar in recent months. (Reporting by Wayne Cole; Editing by Christopher Cushing)