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The Australian and New Zealand dollars edged higher on Tuesday as their U.S. counterpart consolidated after its recent rapid ascent, while gains in key commodity prices offered some fundamental support. The Australian dollar crept to $0.7392 and away from a five-month trough of $0.7311 touched on Monday. The Aussie is still down four cents in the two weeks since Republican Donald Trump won the U.S. Presidency and triggered a jump in inflation wagers and Treasury yields.
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“Expectations are growing that the dollar may rise materially further over the medium term as fiscal expansion is overlaid on an economy operating at or very close to full employment,” said Brian Martin, head of global economics at ANZ.
“At the moment, however, there is no hard detail on what the content of the actual fiscal stimulus will be,” he added. “We are cautious about getting caught up in the whirlwind and revising up our dollar forecasts.”
Aiding the Aussie were gains in copper, coal and iron ore prices, all major export earners for Australia. Coal, in particular, has enjoyed huge gains in the last few months and promises to sharply shrink the country’s monthly trade deficit, if not eliminate it.
The New Zealand dollar also rallied on Tuesday to reach $0.7080, up from Monday’s low of $0.6983. It remains well below the November peak of $0.7403 and faces stiff chart resistance around $0.7145 in the near term. Still to come are speeches from two central bank officials.
Reserve Bank of New Zealand Deputy Governor Geoff Bascand speaks on the impact of changing household behaviour on inflation at 0630 GMT. Reserve Bank of Australia (RBA) assistant governor for economics Christopher Kent also speaks on economic developments across Australia’s states.
New Zealand government bonds gained, sending yields 3 basis points lower along the curve. Australian government bond futures nudged higher in line with Treasuries, with the three-year bond contract up 1 tick at 98.160. The 10-year contract added 2.5 ticks to 97.3750.