SYDNEY, Nov 25 (Reuters) - The Australian and New Zealand
dollars were on a roll on Wednesday as optimism about a
vaccine-led global economic recovery boosted commodity prices
and bond yields.
Strong Chinese demand for steel lifted iron ore prices to
near their highest in more than six years, a windfall for
Australia as the ore is its single largest export earner.
That helped the Aussie up to $0.7365, having
finally cracked resistance at the previous November peak of
$0.7340 to be almost 5% higher for the month so far.
The next barrier is a September top at $0.7413 and a break
there would take it to territory last visited in August 2018.
The kiwi dollar extended its furious run to $0.6974
and briefly traded above $0.7000 for the first time since
mid-2018. It is up almost 5.5% for the month so far.
The latest gains came on Tuesday when the New Zealand
government asked the central bank to consider the problem of
surging house prices in its policy deliberations.
Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr on
Wednesday noted the bank already took housing into account, but
investors still assumed the added focus on red-hot house prices
would impede further easing.
"The proposal to tweak the RBNZ's mandate to explicitly
include house prices was read by market traders as a potential
tightening of monetary policy," said Kiwibank chief economist
Jarrod Kerr. "Further rate cuts were seemingly pushed to the
edge of the table."
Overnight index swaps now imply around 8 basis points of
easing by the end of 2021, compared to more than 25 basis points
of cuts just a couple of weeks ago.
Longer-term bond yields shot higher as the curve steepened
markedly. Yields on five-year paper hit their highest
since August at 0.385%, a world away from the -0.03% touched in
Ten-year yields reached their highest since July
at 0.98%, having climbed 42 basis points so far this month.
Australian bonds are also feeling the heat with 10-year
yields up at 0.944% having risen 10 basis points in
just three sessions.
Three-year bond futures eased a little to 99.825,
but are underpinned by buying from the Reserve Bank of Australia
(RBA) which aims to keep yields near 0.10%.
(Editing by Stephen Coates)