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Australian dlr resilient as commodities slide, RBA rate outlook helps

Published 13/11/2015, 01:04 pm
Australian dlr resilient as commodities slide, RBA rate outlook helps
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By Cecile Lefort and Charlotte Greenfield

SYDNEY/WELLINGTON, Nov 13 (Reuters) - The Australian dollar was on track on Friday to post a 1 percent weekly gain, displaying remarkable resilience amid a commodity tumble and growing speculation of a Federal Reserve interest rate hike next month.

The Australian dollar AUD=D4 held firm at $0.7132, having leapt 0.9 percent on Thursday after a strong jobs report led markets to widen the odds of an interest rate cut.

Interbank futures 0#YIB: nearly priced out the chance of another cut in the Reserve Bank of Australia's 2.0 percent cash rate, cutting the probability of a move in February to 30 percent, from around 50 percent earlier in the week.

The upbeat data also sent bond yields higher, widening the spread between Australian and U.S. two-year yields to 119 basis points and providing extra support to the Aussie dollar.

"We believe in the short term, there is scope for AUD/USD to lift and test 0.7200-0.7250," said Richard Grace, chief currency and rates strategist at Commonwealth Bank of Australia.

"But beyond this period of adjustment, the fundamental downtrend in AUD/USD is intact largely driven by falling commodity prices and the outlook for a stronger USD."

Copper CMCU3 tumbled to six-year lows, while iron ore hovered near four-month troughs.

The Aussie has gained more than one full cent this week, distancing itself from a one-month trough touched on Tuesday. Resistance was found at $0.7170.

Across the Tasman sea, the New Zealand dollar NZD=D4 held at $0.6541, having edged off a one-month trough around 65 cents on Thursday. For the week, it was mostly unchanged, having been stuck in a thin band of $0.6499 to $0.6589.

But it was nursing losses against its Aussie cousin on a diverging rate outlook between Australia and New Zealand. The Aussie was heading for a 1.0 percent weekly gain, having already risen 2.5 percent the week before. AUDNZD=R

The kiwi has come under pressure on growing speculation of further easing by the Reserve Bank of New Zealand in December.

New Zealand government bonds 0#NZTSY= gained, sending yields a couple of basis points lower.

Australian government bond futures hovered near multi-month lows, with the three-year bond contract YTTc1 up 1 tick at 97.860. The 10-year contract YTCc1 was also 1 tick firmer at 97.0250, while the 20-year contract YXXc1 added 1.5 ticks to 96.4900.

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