The Australian and New Zealand dollars flopped around five-month highs on Thursday, pausing after a sharp, week-long rally driven by surging bond yields and expectations for a protracted boom in commodity prices.
Even as calmer global bond and oil markets tempered the rally in the antipodeans, the Aussie marked a fresh six-year peak on the Japanese yen. Against the U.S. dollar, it was quoted at $0.7493 AUD=D3 , just off a previous session high of $0.7507 - its highest since early November.
The kiwi was in a narrower range with a high of $0.6977, just off Wednesday's highest in four months at $0.6988 NZD=D3 , after jumping 1.3% overnight to clear its prior 2022 top of $0.6926. The gains saw it breach a 200-day moving average at $0.6913, opening the way to the next chart target at $0.7080.
Both currencies have been helped by hefty buying against the low-yielding yen, with the Aussie surging 2.8% overnight and hitting its highest since late 2015 at 90.89 yen AUDJPY=D3 .
The gains come as markets price in the risk of an extended conflict in Ukraine and ever-tighter sanctions on Russia, leading to a prolonged rise in commodity prices. That is a windfall for Australian export earnings, but a major drag for Japan which is a net importer of resources.
"Aside from yen weakening, commodity prices have surged and underpinned the Aussie towards the fair value level that it has undershot," Commonwealth Bank's Martin Whetton wrote.
"But also as the Australian rates markets price in an aggressive monetary policy path for the RBA, well in excess of what we believe to a be a realistic measure both outright and relative to other economies."
While Japan is holding its yields around zero, Australian 10-year yields AU10YT=RR have surged nearly 60 basis points so far this month. They hit their highest since late 2018 at 2.82% on Wednesday but were a tad lower at 2.72% on Thursday.
Markets have turned much more hawkish on the Reserve Bank of Australia (RBA), pricing in a real chance it might hike by 50 basis points
0#YIB: at its June meeting and that rates could reach 1.5% by year end. RBAWATCH"The market is missing the point that the RBA seems more comfortable with the risk of moving too late than too early," Prashant Newnaha and Alex Loo of TD Securities said in a note.
"The strip is close to pricing in 6.5 consecutive monthly RBA hikes from the June meeting but the RBA's message has not changed. Too much is priced."
