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Australia dlr hits 6-mth highs vs euro & Swiss franc, NZ dlr firm

SYDNEY/WELLINGTON, June 10 (Reuters) – The Australian dollar held near six-month highs against the euro and Swiss franc on Tuesday as yield-hungry investors piled into carry trades, giving it a fillip against the U.S. dollar.

The New Zealand dollar consolidated gains ahead of an expected hike in interest rates later in the week.

The euro slipped to A$1.4521 , having gone as far as A$1.4508 where it met strong support. A break below A$1.4501, a low touched last week, would take it to the weakest level since November.

The euro has skidded around 4 cents in two weeks. The latest blow came after the European Central Bank (ECB) announced its long-anticipated easing package which encouraged investors to enter carry trades, where they borrow at a low rate in euros to buy the relatively high-yielding Aussie.

“The Aussie started to push higher since the ECB easing. It’s all about search for yield,” said Greg Gibbs, a strategist at Royal Bank of Scotland in Singapore.

Foreign sovereign funds and central banks have also been big buyers of Australian government debt which is one of the few remaining triple A rated liquid assets left.

Dealers cited stops below key support at A$1.4500. The Aussie hovered near three-week highs on the yen and pound.

Euro selling helped the Aussie match a three-week high against its U.S counterpart. It rose as far as $0.9364 and a break could see it test $0.9410, May’s high. It was last at $0.9358.

RBS’s Gibbs said the U.S. dollar tends to underperform in a carry trade environment, and forecasts the Aussie dollar to grind higher.

The Aussie was underpinned by robust Australian business confidence in May despite a tough federal budget, according to a private survey. [ID:nS9N0M300G]

Other data out on Monday showed the first fall in Australian job ads in five months in May, while housing finance was flat in April against forecasts of a 0.2 percent rise.[ID:nS9N0M300F] [ID:nS9N0MU00P]

The New Zealand dollar was steady against the greenback at $0.8495, having bounced from a three-month low of $0.8418 last week.

The currency is seen as likely to stay reasonably anchored ahead of Thursday’s Reserve Bank of New Zealand (RBNZ) monetary policy statement. A rise of 25 basis points to 3.25 percent is widely expected, though some suspect the central bank might signal a slower pace of future tightening.

Near-term support for the kiwi was seen at $0.8470 with resistance at $0.8531.

Domestic data showed a rise of 0.5 percent in manufacturing volumes in the first quarter, which was seen as consistent with GDP growth of at least 1 percent. 

On the cross rates the kiwi was a touch softer at 87.01 yen , but a touch firmer on the euro at NZ$1.5988 . The Aussie was holding its own on the kiwi, edging up to NZ$1.0996 and still in sight of last week’s six-month high of NZ$1.1034.

New Zealand government bonds had an offered tone, sending yields 3.5 basis points higher at the long end.

Australian government bond futures softened, with the three-year bond contract down one tick at 97.150. The 10-year contract also eased 1 tick to 96.210, well off a 10-month high of 96.405 touched last month. (Editing by Eric Meijer)

Source: Reuters

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