- Commodity currencies gain against the US Dollar.
- The USD is volatile, waiting for announcements from the Fed.
- NZD and AUD likely to gain more as bullish trend to continue in commodity prices.
The commodity currencies, NZD and AUD held on to their gains on Tuesday, hitting 10-week high levels. Commodity prices rose higher and expectations of an expansionary budget kept AUD and NZD higher.
The US dollar lost against NZD and AUD as they are commodity currencies related to the trends in the commodities market. Currency traders are keenly awaiting a number of announcements from the Fed this week as well as consumer price data to discern trends and take decisions. Treasuries and USD have been volatile to adjust to the news coming from the Fed.
Even now, the currency traders are waiting and watching as the Fed is likely to come out with some announcements aligned to reducing risks from Coronavirus.
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The commodity currencies, therefore, had a field day. The AUD went back to Au$0.7834 after touching a top of $0.7891 overnight. This is very close to the February peak of $0.8000.
The Kiwi dollar stood at $0.7259, almost touching a 10-week top at $0.7304. Its February peak was up at $0.7463.
The reasons for the excellent performance of both the currencies lie in the rising commodity prices. The Australian dollar in particular was buoyed by the rise in iron ore prices by 10%. Iron ore is Australia’s single-biggest export earner.
The increase in commodity prices over the last week has lent a lot of weightage to the Australian dollar and some analysts feel that it was very undervalued.
The recommendation for buy should now be raised from AU$0.7680 to AU$0.7785, said another forex analyst.
As far as bonds in Australia are concerned, the RBA was buying more bonds than the government was selling, this was keeping the yields lower.
However, the Yields in New Zealand have been rising, with the 10-year NZ10YT=RR having risen steadily for the last couple of weeks to reach 1.795%.
Going forward, due to supply problems, the commodity prices could remain higher, which in turn will keep the commodity currencies perform better as compared to USD, according to analysts.
Several currencies edged up against the USD. The British pound also was close to its strongest in February, Euro also moved higher, the Japanese yen was flat.