SYDNEY, August 3 (Reuters) - The Australian dollar popped higher on Tuesday after the country's central bank surprised markets by sticking with plans to taper bond buying, arguing the economy will recover quickly once coronavirus lockdowns ease.
The Aussie gained 0.6% to $0.7404 when the Reserve Bank of Australia (RBA) said it would trim its weekly bond buying to A$4 billion ($2.96 billion) in September as planned.
Many analysts had expected them to postpone the tapering given lockdowns in major cities looked certain to trigger a sharp contraction in the economy this quarter.
RBA Governor Philip Lowe acknowledged the damage but noted the experience so far was that once virus outbreaks are contained, the economy bounces back quickly.
"Prior to the current virus outbreaks, the Australian economy had considerable momentum and it is still expected to grow strongly again next year," Lowe said.
The central bank forecast economic growth of just over 4% in 2022, up from a previous 3.5%. It also saw unemployment dropping to 4% by the end of 2023, which would be around full employment.
"The RBA's decision to not delay the tapering of its asset purchases is a hawkish signal and consistent with our view that the Bank will hike rates in early-2023," said Marcel Thieliant, a senior Australia economist at Capital Economics.
"We reiterate our long-held view that the Bank will end its asset purchases in the middle of next year."
The RBA's optimism gives the Aussie a chance to test resistance around $0.7415, where a break would open the way for a bounce to $0.7500.
The New Zealand dollar was also pulled higher to reach $0.7013, but faces resistance at $0.7020 and $0.7050.
($1 = 1.3517 Australian dollars) (Additonal reporting by Paulina Duran; Editing by Jacqueline Wong)
