SYDNEY, March 3 (Reuters) – The Australian and New Zealand dollars edged up on Wednesday as upbeat economic news at home and strengthening global commodity prices bolstered sentiment, while bonds calmed after last week’s unrest.
The Aussie was up to $ 0.7835 and is further from Friday’s low of $ 0.7693, which took a hit when surging global bond yields knocked investors out of riskier assets.
It faces a layer of resistance from $ 0.7845 to $ 0.7915, and remains well off last week’s three-year peak of $ 0.8007.
The kiwi rebounded to $ 0.7302, after briefly dipping to $ 0.7210 overnight. Resistance lies around $ 0.7305 and $ 0.7360.
Australian data showed the economy grew at a rapid pace of 3.1% in the December quarter, easily topping the 1.5% forecast and the strongest back-to-back quarterly performance in the series’ 60 year history.
Gross domestic product is still down 1.1% this year, reflecting the devastating damage done during the lockdown pandemic, but all the signs are activity remains strong with free consumer spending.
The bond market welcomed the data calmly given the Reserve Bank of Australia (RBA) recently committed back to keeping policy very easy.
The central bank is determined to push wages and inflation much higher before tightening, and there is little evidence of a domestically driven inflation in the GDP report.
However, the prospect of rapid growth appears to be confirming much of the recent increase in yields, even if the pace of that movement is exaggerated.
“We think the pressure on the RBA is increasing,” said Nomura economist Andrew Ticehurst. “Data continues to beat consensus, house price momentum appears to be accelerating, and rising job advertisements bodes well for future job growth.”
He now doubts the RBA will extend its three-year yield target to November 2024 bonds. He also opted to buy the Aussie against the euro given the different growth dynamics in their economies.
The implied three-year yield in the futures market is trading around 0.30%, suggesting investors believe the RBA should raise its target 0.1% over time.
While the yields on the 10-year paper have stabilized at 1.71%, from their recent peak of 1.97%, they are still up 73 basis points this year.
Kiwis are benefiting themselves from the latest auction of dairy products, the country’s biggest export of goods, which saw prices jump 15%. The price of powdered milk jumped 21% to the highest level in seven years, promising a windfall for farmers. (Reporting by Wayne Cole; Editing by Muralikumar Anantharaman)