Australian, New Zealand dollars buoyed by risk-on mood

[SYDNEY] The Australian and New Zealand dollars were firmer on Tuesday, as investor sentiment turned positive amidst renewed optimism that China will continue to underpin growth in the region.

The Aussie rose 0.3 per cent against the greenback to US$0.7705 , loitering below the US$0.78 resistance level at which it has traded the last three sessions.

The kiwi dollar was also higher at US$0.7134, but remained under the US$0.72 resistance level it set on Friday.

Both the kiwi and the Aussie, liquid proxies for risk, have been tracking commodity prices, analysts said.

"Clearer signs that the A$ is topping can be seen in recent price action with the likes of copper and zinc under more pressure too as the last of the "Biden good news" appears to be priced in for now," Westpac Banking Corp analysts said.

Data on Monday showed China's economy, the world's second largest, picked up speed in the fourth quarter and was one of the few to grow over 2020.

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Expectations that US President-elect Joe Biden's first 100 days will be focused on rolling out coronavirus inoculations and providing economic stimulus, could weaken the dollar in coming days, they added.

Australia and New Zealand Banking Group analyst are therefore looking "for signals to re-establish long positions" in the New Zealand dollar.

Volumes were thin with little news flow and as markets paused due to a US holiday and ahead of president-elect Joe Biden's Inauguration on Thursday.

New Zealand government bonds fell slightly, sending yields about half a basis point higher across the curve.

Three-year bond futures were half a basis point lower at 99.815, while yields on 10-year bonds were trading at 1.057 per cent, having started the week at 1.031 per cent.

Three-year cash yields were pinned at 0.12 per cent, near the Reserve Bank of Australia's (RBA) target rate of 0.1 per cent.

REUTERS