Australia, NZ dollars hold near one-month highs as stocks rally

SYDNEY: The Australian and New Zealand dollars held near one-month highs on Wednesday as global equities rallied on hopes of renewed peace talks to end the Iran war, while a drop in oil prices soothed fears of runaway inflation and helped bonds. The Aussie edged up 0.1% to $0.7131 after gaining 0.4% overnight to a one-month top of $0.7147. Bulls are eyeing the four-year high of $0.7188 from March, while support is around $0.6980. The New Zealand dollar was steady at $0.5900, after gaining 0.6% overnight to a one-month peak of $0.5920. Resistance is around $0.5940, while support is around $0.5890. US President Donald Trump said talks with Iran could resume in Pakistan over the next two days as hopes grow for a resolution to end the war that has unleashed a global energy shock. Signs that diplomatic engagement would continue helped push benchmark oil prices below $100 a barrel. Bonds gained as the drop in oil prices soothed inflation fears. Three-year Australian government bond yields fell 2 basis points to 4.607% after a 7 bp drop on Tuesday, while the benchmark 10-year yield was also down 2 bps to 4.932%. Imre Speizer, a strategist at Westpac, said given attempts at de-escalation in the Middle East, the Australian dollar could still rise to 75 cents in the second half of the year on its yield advantage and the constructive underlying growth story. “The main risk to our view would be a notable cooling in domestic growth and the labour market, upending yield support for the currency,” he added. All eyes will be on Australian jobs data on Thursday, with economists tipping a trend-like 20,000 increase in employment for March and a steady jobless rate at 4.3%. An upside surprise would bolster the case for a third interest rate hike from the Reserve Bank of Australia in May, which is now about 68% priced in. A miss would back dismal confidence surveys released on Tuesday that signalled the economy could be bracing for a sharp slowdown ahead, placing the RBA in a tricky spot as inflation accelerates.

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