THE Australia and New Zealand dollars were headed for weekly gains on Friday, as signs of progress in both countries to rein in the pandemic raised hopes their economies were closer to reopening.
The Australian dollar advanced 0.2% to $0.7414 to hover near its Aug. 4 high. The currency was up 1.3% for the week and 4% on the last two weeks, its best performance since May last year. Resistance is now at the August top of $0.7426.
Likewise, the kiwi rose to a more than two-month high of $0.7130, popping above key resistance as New Zealand reported a sharp fall in COVID-19 cases. The currency was also set for weekly gains of 1.5%.
Sentiment improved as Australia’s Prime Minister Scott Morrison said economic reopening might be brought forward after securing a deal to double the stock of Pfizer doses, helping boost an already-ramped up vaccination rate.
At the current pace, around 80% of the adult population could be vaccinated by November, which would put the economy back on track by end of this year after a deep contraction was certain for the September quarter.
“The Aussie should recover to around $0.75 at this stage, with our year-end target still $0.78,” said Imre Speizer, Head of NZ Strategy at Westpac.
But with major cities still shut down, the markets are quite divided over whether the Reserve Bank of Australia (RBA) would stick with its decision to continue to pare back stimulus at next week’s policy meeting, a Reuters poll showed.
Yields on Australia’s 10-year paper were up by 3 basis points this week as forecast-beating June quarter growth figures on Wednesday made it seem more possible that RBA would continue to taper.
Meanwhile, a key risk awaiting the Antipodean currencies was the U.S. payroll data due later in the day, which could determine the Federal Reserve’s timeline to tighten monetary policy and influence the dollar’s movement. A more hawkish Fed outlook would lift the greenback against Asian currencies.
In New Zealand’s most populated city of Auckland, new daily COVID-19 cases fell to 27 from 49 the previous day, fuelling hopes that it could be out of the strict lockdown soon like other cities where curbs were eased earlier this week.
The Pacific country’s control of the pandemic has polished its economic outlook and provided more room to the local central bank to hike rates at the Oct. 6 meeting, which is likely to keep the kiwi afloat.
Benchmark bond yields hit a two-month peak at 1.862%, lending the kiwi support. – Reuters