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Aussie flies above parity, NZ$ near 31-month highs

November 6, 2010 · 190470 Comments2010-11-06+10%3A23%3A06Qalinle+Hussein

SYDNEY/WELLINGTON, (Somalilandpress) — The Australian dollar raced to new 28-year peaks on Friday and the New Zealand dollar held close to 31-month highs as investors used the U.S. currency to fund positions in other higher-yielding assets.

* The Aussie tore as high as $1.0175 in early trade, before pulling back on mild profit-taking to $1.0132. Given it has leapt 2.8 percent this week, its biggest gain in any week in three months, it might be due for some consolidation for now.

* Charts suggested it could ease back to consolidate within a $1.0000-$1.0080 range, with a drop below $0.9850 possibly heralding a deeper correction.

* Australia-U.S. two-year yield spread <0#AUBMK=> <0#USBMK=> at its widest in nearly 1-½ years at 471 basis points also underpinning Australia dollar.

* On the yen, it was strong at 81.99, a hair’s breadth from a five-month high of 82.15 .

* Quarterly remarks from the Reserve Bank of Australia (RBA) offered no major surprises. The bank sounded upbeat and kept its growth and inflation forecasts while raising its prediction for Australia’s trade boom. In all, the comments argued for further rate hikes. [ID:nCBR000099]

* February interbank futures <0#YIB:> showed investors were priced for a 32 percent chance for rates to rise to 5.0 percent by then.

* NZ dollar trades sideways in a tight range around $0.7940/50 after storming to a high of $0.7976 overnight, its highest since May 2008.

* Kiwi looks overbought but uptrend still appears intact for an assault on $0.8000. Currency has gained close to 4 percent this week having been propelled by the decline of the U.S. dollar in the wake of the Federal Reserve’s pump priming policies, and upbeat local jobs data.

* Support for kiwi seen at $0.7880 and then $0.7840, with $0.8000 the pyschological barrier ahead of $0.8050.

* Near term drivers for currency markets are the outcome of the Bank of Japan’s policy meeting, which is not expected to see any further monetary easing, with U.S. non-farm payrolls the final event. Reuters poll expects 60,000 jobs to be created.

* The Antipodeans likely to be beneficiaries of the Fed’s policy which is seen encouraging investors to borrow in U.S. dollars to invest in assets that offer higher returns and are leveraged to global growth, such as commodities. [ID:nN03163902]

* The Aussie/kiwi pair a hint softer around NZ$1.2760, from around NZ$1.2800. Markets are betting the yield gap between the two currencies will narrow next year when the Reserve Bank of NZ resumes raising rates. The Aussie hit a seven-month high of NZ$1.3220 late last month.

* NZ government debt <0#NZTSY=> firmer with local bond yields a tick lower, while swap yields as much as 4.5 basis points lower.

* Australian bond futures softer, with three-year futures 3 ticks lower at 94.92 while the 10-year down 1.5 points to 94.735. (With contributions from ThomsonReuters FX analyst Krishna Kumar)

Source: Reuters | Saturday, 6 November 2010
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By Qalinle Hussein

Tags: Australian, Dollar, Greenback, New Zealand