By Wayne Cole
SYDNEY, June 3 (Reuters) - The Australian and New Zealand dollars on Wednesday extended a rally that has delivered gains of 3-4% in just three sessions as progress on opening economies across the globe boosted risk assets.
The Aussie added another 0.6% to $0.6936 AUD=D3 having hit its highest since early January at $0.6982.
It has now climbed 4.4% in just three sessions as breaks of the 200-day moving average at $0.6660 and major chart resistance around $0.6685 triggered a wave of short covering. The next targets are $0.7000 and a top from December at $0.7032.
The kiwi dollar jumped 0.6% to $0.6404 NZD=D3 and was challenging its March peak at $0.6448. It was up 3.5% for the week so far and a world away from the March trough of $0.5469.
The shift to risk took a heavy toll on the yen as the Aussie shot to a five-month peak at 75.74 AUDJPY= , bringing gains made just this week to 4.7%.
As a result many economists were hastily revising up their outlook for the Aussie.
"With the world economy in the early stages of a long recovery, led by Chinese fiscal stimulus, the prospects for commodity currencies such as AUD/USD have brightened," said Joseph Capurso, an FX analyst at CBA.
"We expect AUD/USD to exceed its pre-coronavirus level of $0.70 before the end of 2020 and lift to the mid-70s in 2021."
The gains came even as data showed the Australian economy shrank 0.3% in the March quarter, the first fall since early 2011 and just a prelude to a huge drop this quarter as whole sectors shut down to fight the coronavirus. decline all but certainly ends the country's three-decade run without a recession, but the downturn still looks mild compared to what many other developed nations are facing.
Weekly data on card spending, consumer sentiment, travel and the like suggest activity has since rebounded as success in containing the virus allows much of the economy to re-open.
After its monthly policy meeting on Tuesday, the Reserve Bank of Australia said the downturn might not be as deep as first feared, curbing speculation it might have to move to negative interest rates.
That saw yields on 10-year bonds AU10YT=RR rise 7 basis points to 0.978% to near the May high at 1.02%. The 10-year bond future YTCc1 fell 6.5 ticks to 99.0400.
Yet three-year bond yields AU3YT=RR remain flat at 0.269%, anchored to the RBA's target of 0.25%.