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Australian and New Zealand dollars hit 10-week highs

On May 10, the risk-sensitive currencies, the Australian and New Zealand dollars, rose to near 10-week highs against their U.S. counterpart. Notably, a disappointing jobs report pressured the greenback, and strong commodity prices aided risk appetite.

The Australian dollar increased by 0.1% and settled at $0.7854 after passing critical chart resistance of $0.7815 on Friday.

It boosted as high as $0.7863, a level unseen since late February. Remarkably, the surge was supported by solid Australian retail sales data and a strong business conditions survey.

The currency is facing resistance at 0.7865, a breach of which would take it as high as $0.7885. Meanwhile, chart support is placed in the $0.7815-20 region.

The Australian dollar surged 1.7% last week, marking its best weekly performance since November

The Australian dollar can continue to rise

According to CBA’s currency strategist Kim Mundy, AUD/USD can remain elevated this week because commodity prices show little sign of peaking.

She added that iron ore prices surged to fresh cyclical highs last week as a lift in Australia-China tensions sparked supply concerns.

However, Mundy also announced that if China’s demand for Australia’s iron ore remains unchanged, the Australian dollar can continue to rise.

Iron ore is Australia’s leading export earner, with China its top buyer.

Notably, the main highlight in Australia this week is the Australian Budget on May 11. It is expected to show a greatly improved fiscal position on the back of a stronger-than-anticipated economic recovery and high iron ore prices.

The New Zealand dollar stood at $0.7279, close to Friday’s 10-week high of $0.7300. The currency surged 1.7% last week, it’s best weekly showing since November 2020.

New Zealand government bonds fell, pushing yields around 2-3 basis points higher at the long-end of the curve.

Australian government bond futures declined, with the three-year bond contract off half a tick at 99.745. The 10-year contract fell 3.5 ticks to 98.335.

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