Aussie and Kiwi dollars get back on the growth path
02:44, 22 October 2021
The Aussie dollar and the Kiwi dollar clawed back with gains versus the US dollar on Friday, after the Antipodean currencies lost ground a day earlier.
The Australian dollar was up 0.2% at 74.80 US cents during mid-morning trading in Sydney, inching back up towards the three-month high of 75.25 US cents it hit during intraday trading on Thursday.
Meanwhile, the New Zealand dollar was up 0.24% at 71.71 US cents during afternoon trading in Auckland, marching back towards its three-month high of 72.14 US cents it reached during intraday trading a day earlier.
Commodity outlook dragged down the Aussie
Both currencies had lost some ground on Thursday after reaching three-month highs, albeit for different reasons.
“Falling industrial commodities dragged AUD crosses lower, while the broad USD managed to outperform following recent declines. Commodities will remain key for the AUD with the near-term risks balanced,” analysts at ANZ Research wrote in a note.
“The ever aggressive intervention by China in coal markets has had a significant impact on pricing in the energy sector with the front month Chinese thermal coal contract down by a combined 28% over the last four trading sessions while Newcastle thermal coal has dropped by 38% over the last two weeks. Metals have also dropped sharply, with copper down 3.9%; nickel down 4.9% and aluminium down 5.4% last night" analysts at Westpac wrote in a note.
OCBC bullish on the Aussie
"Not surprised to see a reasonable AUD correction from very overbought levels and a key day reversal suggesting more weakness to come. A drop back towards 0.7400 looks to be on the cards,” Westpac added.
However, the currency strategists at Singapore’s OCBC Bank differ. “The AUD-USD gains have been more relentless than expected. A successful breach of 0.7500 will put the 0.7550/60 zone in sight. A cluster of resistances there though, which should imply a better cap. Better risk sentiment and firmer equities continue to support,” OCBC Bank’s analysts said in a note.
For the Kiwi dollar, analysts at ANZ Research said the drop on Thursday was because of profit booking. The New Zealand dollar has had a stellar run since 6 October, when it was at a near three-month low of 68.77 US cents.
Kiwi may be overbought
According to the analysts at UOB Bank, the New Zealand dollar remains overbought. “Overall, the NZD strength that started late last week is deemed intact as long as the ‘strong support’ at 0.7125 is not breached,” the note said.
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