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Australia dollar set for weekly gain, kiwi extends downtrend

10/09/2020 | 12:11am EST

SYDNEY, Oct 9 (Reuters) - The Australian dollar is poised to end the week in positive territory on Friday, strengthened by bullish risk sentiment and higher commodity prices, while its New Zealand counterpart lagged behind on aggressive monetary easing bets.

The Aussie, which is often traded as a proxy for yuan, was 14 pips higher on Friday at $0.7181, with data showing that the recovery in China's services sector activity extended its fifth straight month in September.

The risk-sensitive Aussie is set for a further quarter of a percent rise this week, extending the previous week's 1.92% gain. A pick-up in crude and iron ore prices boosted the currency.

The New Zealand dollar, meanwhile, weakened 0.5% to $0.6507 so far this week, following dovish statement from the Reserve Bank of New Zealand (RBNZ) on Thursday that it was "actively working" on negative interest rates.

The unit was up 0.4% at $0.6607 on Friday.

RBNZ officials "said that they'd rather be aggressive with the delivery of monetary stimulus and be seen to do too much too soon rather than too little too late," Commonwealth Bank analysts wrote in a note.

They expect the RBNZ to cut the official cash rate by 75 basis points to -0.5% in April 2021.

The Reserve Bank of Australia (RBA), on the other hand, is widely expected to further lower its cash rate to 0.1% from a record low 0.25% at its November policy meeting but has repeatedly said negative rates were "extraordinarily unlikely."

The dynamic helped pushed the Australian dollar up 0.83% for its largest weekly gain against the kiwi since mid-August.

On Friday, the RBA released its biannual Financial Stability Review (FSR) in which it said the country's financial system was strong to weather the economic shock though business failures were likely to increase.

Australian government bond futures were steady, with the three-year bond contract unchanged at 99.815. The 10-year contract was up two ticks at 99.15.

New Zealand government bonds rose slightly, sending yields about 3 basis points lower across the long-end of the curve. (Editing by Sherry Jacob-Phillips)

© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / CANADIAN DOLLAR (AUD/CAD) 0.18% 0.95964 Delayed Quote.5.17%
AUSTRALIAN DOLLAR / JAPANESE YEN (AUD/JPY) -0.04% 76.659 Delayed Quote.0.83%
AUSTRALIAN DOLLAR / NEW ZEALAND DOLLAR (AUD/NZD) 0.01% 1.05074 Delayed Quote.0.69%
AUSTRALIAN DOLLAR / SWISS FRANC (AUD/CHF) 0.16% 0.66795 Delayed Quote.-1.36%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) 0.25% 0.7374 Delayed Quote.4.97%
BRITISH POUND / AUSTRALIAN DOLLAR (GBP/AUD) -0.12% 1.81246 Delayed Quote.-3.85%
EURO / AUSTRALIAN DOLLAR (EUR/AUD) -0.13% 1.6167 Delayed Quote.1.29%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 0.21% 0.7017 Delayed Quote.4.20%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) 0.06% 6.5711 Delayed Quote.-5.69%
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