Boosted by continued strength in global commodity prices, general US dollar weakness and the Reserve Bank of New Zealand’s decision to leave rates unchanged at its June monetary policy meeting, the Australian dollar continued to push higher in overnight trade, briefly hitting a high of .7500 in early Asian trade.
“Higher commodity prices, led by further gains in oil prices above US$51 per barrel, have supported AUD,” said Richard Grace, chief currency strategist at the Commonwealth Bank.
“Base metal and iron ore prices also moved higher overnight. Recovering commodity prices, leading into a stabilisation and modest increase in Australia’s terms of trade, are one of the key reasons we are not bearish AUD/USD.”
Grace also notes that the Aussie rose in sympathy with the New Zealand dollar following the decision from the Reserve Bank of New Zealand to leave interest rates unchanged at 2.25% at its June policy meeting, bucking expectations from a slim majority of economists who were forecasting a rate cut to 2%.
“NZD/USD has surged above 0.7100, after the RBNZ left interest rates unchanged as they provided a more upbeat assessment of global economic activity, domestic economic activity, short-term inflation expectations, and a reference to housing sector financial stability risks,” says Grace.
As a result of the non-move from the RBNZ, the AUD/USD rose to as high as .7500 before easing in recent trade. It currently buys .7491, the highest level seen since early May.
Turning to Thursday trade in Asia, there are few events on the horizon that appear likely to generate any significant volatility in the Aussie, or markets as a whole.
China’s National Bureau of Statistics will release consumer and producer price inflation figures for May, although of late this report has lost its influence on markets.
With no other major events to speak of, movements in crude oil, stocks and USD/JPY will likely prove to be the greatest influences on the Aussie on Thursday.