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Home/Aussie, Kiwi dollars try to rally as sentiment improves
australian-dollar

Aussie, Kiwi dollars try to rally as sentiment improves

The Australian dollar jumped to $0.7350, while the New Zealand dollar was at $0.6950

The Australian and New Zealand dollars were trying to sustain a rally on Thursday as global sentiment improved a little, though the rising economic impact of lockdowns in Australia meant risks remained to the downside.

The Australian dollar jumped to $0.7350, having reached an eight-month trough of $0.7290 overnight. It needs to get above resistance at $0.7410 to break the current downtrend, which has now been running for five weeks.

The New Zealand dollar was at $0.6950, after also touching an eight-month low at $0.6882. Support lies at $0.6920 with resistance around $0.6980 and $0.7050.

A rebound in world stock markets helped lessen the pressure on risk currencies, and the Aussie got some support as data showed Australia boasted a record goods surplus in June.

According to the preliminary trade figures, goods exports climbed 8% in June to deliver a surplus of A$13.3 billion ($9.78 billion), with iron ore surging on strong Chinese demand.

However, the domestic economic outlook has taken a blow from rising Covid cases in Sydney which may keep the city locked down for now.

With cases of local community transmission continuing at uncomfortable levels, and amid a low rate of vaccination, the possibility of further lockdown-extensions appears very real, Nomura economist Andrew Ticehurst said. He estimated the lockdowns could see gross domestic product shrink by a steep 1% this quarter.

Unlike many other economists, he felt the Reserve Bank of Australia (RBA) would stick with its plan to taper bond buying by a billion dollars to A$4 billion a week in September.

Unwinding QE without causing a 'taper tantrum' can be challenging, and the RBA has managed a first step, and with AUD lower, to boot, he said. We think it would be unwise to walk this back, despite the deterioration in the COVID-19 situation.