Australia, NZ dollars gain ground as greenback, yen retreat

SYDNEY: The Australian and New Zealand dollars crept to multi-week highs on Tuesday as falling Treasury yields dragged on the greenback, while political uncertainty pulled the Japanese yen to a two-month trough.

Australian bonds have lagged the rally in Treasuries, widening the spread over 10-year US yields out to around 21 basis points from -20 basis points back in mid-June.

The swing to a positive spread helped lift the Aussie to a seven-week top at $0.6600, having climbed 0.6% overnight.

The next major hurdle is a $0.6625 top from August, and a break would take the Aussie to ground not trodden since November last year, opening the way to $0.6687 and $0.6793.

It was also up at 97.19 yen, having risen 0.6% on Monday to reach as far as 97.42.

That was just a pip from a 97.43 peak hit in mid-July that marks the top of a trading range held for much of the year so far.

A break above would thus be technically bullish for a run to targets at 99.16, and even 102.40.

The kiwi dollar steadied at $0.5941, after rallying 0.8% in the previous session to reach a one-month high.

It faces resistance at $0.5996 and $0.6059.

Local economic data was too mixed to offer much direction.

A survey of Australian businesses showed conditions improved in August, with profits and employment bouncing.

In a promising sign for inflation, input cost pressures eased to the lowest since 2021 while retail price growth slowed markedly.

A survey of consumers, meanwhile, showed confidence falling back from 3-1/2-year highs amid worries about the economic outlook.

The survey has a patchy correlation to actual consumption, but could suggest the rebound in spending seen in the second quarter has petered out somewhat.

Data on card spending from the major banks has also pointed to a moderation since June.

The Reserve Bank of Australia has hinted that continued strength in consumption might limit how much further interest rates could fall.

Markets imply just a one-in-five chance of a cut at the RBA’s next meeting on September 30, but an 86% probability of a quarter-point reduction to 3.35% at its November 4 meeting.

Data out of New Zealand showed a surprisingly sharp fall in sales across a range of industries in the second quarter, pointing to downside risks for growth.