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Australia, NZ dlrs upbeat as risk appetite improves

Published 01/06/2020, 02:29 pm
Updated 01/06/2020, 02:30 pm
© Reuters.

By Swati Pandey

SYDNEY, June 1(Reuters) - The Australian dollar jumped to a 2-1/2 month peak on Monday while its New Zealand peer was upbeat too as risk appetite improved with world economies gradually re-opening after shutting down for months.

The Australian dollar AUD=D4 , a liquid gauge for global risk, jumped 0.7% to $0.6722 rising above its 200-day moving average in a bullish technical signal.

The Aussie went as far as $0.6742, a level not seen since mid-February.

The New Zealand dollar NZD=D4 climbed to a 1-1/2 month high of $0.6250. It was last up 0.5% at $0.6237.

"It's tough to be a bear at the moment and the path of least resistance for risk remains to the upside in my opinion," said Chris Weston, Melbourne-based analyst at broker Pepperstone.

Weston noted that implied volatility in the U.S. Treasury curve was not too far off its all-time lows.

"A calm bond market is a risk-friendly backdrop for equity appreciation, while risk FX and high carry currencies will also do nicely," he added. "AUD/USD and AUD/JPY have been my default equity proxies."

Traders are focussing on the Reserve Bank of Australia's (RBA) policy meeting on Tuesday at 0430 GMT where it is widely expected to leave rates at 0.25% and reiterate its intention to do "what it takes" to keep near-term yields low.

Next on investors' radar is March quarter gross domestic product (GDP) data due Wednesday which is expected to show a 0.3% quarterly decline. AUD has recently seen support as the RBA continues to rule out the potential for negative interest rates," said Steven Dooley, currency strategist at Western Union Business Solutions.

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Just last week, RBA Governor Philip Lowe reiterated negative rates were "extraordinarily unlikely" in Australia, sounding upbeat about the earlier-than-expected re-opening of the country's economy. contrast, the Reserve Bank of New Zealand (RBNZ) is already laying the ground work for its official cash rate to go below zero by year-end.

The resilience in financial markets was notable given riots in U.S. cities and unease over Washington's power struggle with Beijing linked to China's tightening grip on Hong Kong. Zealand's bond market was shut for a public holiday.

Australian government bond futures were off a tad, with the 10-year contract YTCc1 down 1 tick to 99.115. (Editing by Shri Navaratnam)

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