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Australia, NZ dlrs Surf Reflation Wave, Bonds Left Drowning

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SYDNEY, Feb 22 Reuters The Australian and New Zealand dollars hit threeyear highs on Monday as optimism on global growth set a fire under commodity prices, while fears of faster inflation sent bond yields surging.

The Aussie was up at 0.7878 having crossed 0.7900 for the first time since early 2018 to reach 0.7908. Traders said a break of the January peak at 0.7819 sparked a wave of buying by momentum funds, with the next targets being 0.7916 and 0.7988.

The kiwi dollar climbed to 0.7307, and stretched as far as 0.7338 at one stage having finally cracked the January top of 0.7314. The next target is 0.7395.

An extra fillip was provided by SP raising its New Zealand rating a notch to AA , citing the surprising strength of the economy and a better outlook for government finances.

Broader support came from the latest spike in industrial commodity prices, from copper to aluminium, nickel and tin.

As well as the break above the yeartodate high exciting technically based traders, the seemingly unrelenting strength of commodity prices is doubtless a factor, said Ray Attrill, head of FX strategy at NAB.

The rise in prices in recent days has served to push our medium term fair value estimate for AUDUSD up to 80 cents.

At the same time the tide of wagers on faster global inflation have hammered bond markets, with yields in Australia and New Zealand surging even more than for Treasuries.

Australian 10year yields shot up 15 basis points to 1.578 which, barring a brief…

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