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Australia, NZ dollars take much-needed breather after uphill race

Published 04/06/2020, 01:17 pm
Updated 04/06/2020, 01:18 pm
© Reuters.
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By Wayne Cole

SYDNEY, June 4 (Reuters) - The Australian and New Zealand dollars hit a setback on Thursday as the sheer scale of recent gains tempted speculators to book profits, though analysts were revising up the outlook for both currencies as investors globally rediscover risk.

The Aussie pulled back to $0.6898 AUD=D3 , after scaling a five-month peak of $0.6982 on Wednesday. It was still up 3.3% on the week so far and a long way from the $0.5510 trough touched during the market chaos of March.

Near-term support comes in around $0.6857, with resistance at $0.7000 and $0.7032.

The kiwi dollar eased to $0.6418 NZD=D3 , from Wednesday's three-month top of $0.6444, but again was 3.4% higher for the week. Support lies around $0.6406 and $0.6392, with resistance at the March high of $0.6448.

"Improvements in key fundamental drivers have rightly driven AUD and NZD higher," said Ray Attrill, head of FX strategy at NAB, citing strength in commodity prices and gains in world stock markets as more economies re-open.

"Some overshoot in recent days suggests near-term consolidation, ahead of further gains through the second half and into next year."

NAB now forecast the Aussie at $0.6800 for June, up from $0.6200 previously, and at $0.7000 by September. The kiwi was seen around $0.6300 by the end of June and $0.6400 in September.

While Australian data out on Thursday underlined the economic damage done by coronavirus lockdowns in April, the country's success in containing the virus meant markets were already pricing in faster pick up ahead.

The figures showed retail sales sank a record 17.7% in April, with collapsing consumption certain to cause the deepest recession since the Great Depression. country's trade surplus also narrowed 16% in April to A$8.8 billion ($6.07 billion), but still managed to beat forecasts of A$7.5 billion.

The global rush to risk was finally enough to shake the bond market's recent equanimity and lift 10-year bond yields AU10YT=RR up to 1.01%, from 0.90% at the end of last week. Yields briefly reached 1.058%, the highest since mid-March.

The damage was a lot less at the short end as the Reserve Bank of Australia (RBA) remains committed to keeping three-year yields around 0.25%. Three-year bond futures YTTc1 were off just half a tick at 99.720. ($1 = 1.4501 Australian dollars) (Editing by Sam Holmes)

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