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Australia, NZ dlrs extend rally as China central bank calms nerves

Published 13/08/2015, 01:37 pm
Australia, NZ dlrs extend rally as China central bank calms nerves
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By Cecile Lefort and Gyles Beckford

SYDNEY/WELLINGTON, Aug 13 (Reuters) - The Australian and New Zealand dollars bounced away from six-year lows on Thursday as assurances from China's central bank that it was not aiming to aggressively devalue the yuan helped soothe market jitters.

The Australian dollar crept up to $0.7384, extending an overnight recovery of 1 percent.

It did briefly drop half a cent after China allowed its currency to decline at the fixing, but quickly recovered when the yuan stabilised.

"The Aussie is higher because the Chinese central bank is trying to slow down the depreciation of its currency by selling U.S. dollars," said Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia.

The Aussie had plumbed $0.7217 on Wednesday, its lowest since 2009, on concerns about the health of China's economy.

The market often uses the Aussie as a liquid proxy to hedge against weakness, or wager on strength, in China.

The better risk sentiment led to firmer equity and commodity prices and some weakness in the U.S. dollar.

Charts have also turned bullish after Fibonacci support held firm at $0.7185 and $0.7204, with scope for a rally as far as 76 cents possible over the next few trading sessions.

Resistance was found at Tuesday's peak of $0.7440 and then at $0.7500.

The New Zealand dollar NZD=D4 edged up to $0.6632 and away from a six-year low of $0.6468 touched on Wednesday. The kiwi's near-term support is seen at $0.6570 and then just below $0.6500, with the overnight high capping the topside.

A flurry of second-tier local data showed house prices pushing to a record level, manufacturing activity slowing a little and food prices boosted by winter weather.

New Zealand government bond yields were as much as 4 basis points higher.

Australian government bond futures fell sharply as the need for safe havens receded a little. The three-year bond contract came off 7 ticks to 98.050, while the 10-year contract lost 9 ticks to 97.2150.

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