USD gains against different currencies, but Aussie & Kiwi dollars stay firm

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Summary

• NZ and Australian dollars hold up against USD.
• USD strengthens against several other currencies.
• Investors in currency market waiting for the FED Chairman’s speech to see the direction bond markets take.

The dollar rose yet again against some currencies ahead of the speech by the Fed chief Jerome Powell in mid-March. The speech is likely to signal the direction that the bond markets are going to take and set the tone for the rate of currencies.

With increased bond yields in the past few days, the dollar gained strength against the Yen. It was also trading high against the Swiss franc and held on to gains against most currencies.

According to analysts, the performance of the US dollar was different against different currencies. 

The good news is that USD lost against Australian and New Zealand currencies as traders continued to stock on commodity currencies. 

The currency market investors are keen to see if Powell shows concern in his policy statement to be announced on March 17, 2021.

However, the Australian and New Zealand dollars firmed up as they are linked to the commodities market, the Australian dollar is often looked as a good global-growth model due to its linkages with recovery in commodities. It rose to NZ$0.7799.  

Even the NZ dollar was firmer.

Analysts were very bullish on the Australian and NZ dollars and said that they were likely to continue rising because both the economies were seeing a strong pick up in the economy and they were likely to benefit from the spurt in the global trade.

The 10-year Treasury yield went up by 1.6757% last week.

Earlier also, when the US bond yields had increased marginally and USD gained strength against most world currencies, the New Zealand and Australian dollars remained steady.

The support came from increasing commodity prices like those of copper and tin creating new records. So, since commodity prices are very supportive, the Australian and New Zealand dollars remained steady while other currencies showed weakness.

It may be noted that uncertainty from the pandemic made the currencies very volatile.

While the dollars in Australia and New Zealand remained at steady levels, the bonds followed a similar pattern, the yields increased, and the prices fell.

It may be recalled that in February, the NZ 10-year bond yields increased by 21 bps for the week at 1.545%.

The Australian 10-year bond yields increased 19 basis points in February. This signaled the biggest rise since June last year.

The yields on three-year cash bonds in Australia saw a rise of marginal 0.13% in February.