Australian And New Zealand Dollars Surge As Commodities Rise

In recent financial news, the Australian and New Zealand dollars have made a notable comeback, moving closer to their multi-month highs. This resurgence is largely attributed to positive developments in China, where new policy easing has led to a significant boost in commodity prices. As a result, the Australian dollar, often referred to as the 'Aussie,' has seen a 0.2% increase, reaching $0.6916, just shy of its 20-month peak of $0.6937 achieved last Friday.

Last week, the Aussie surged by 1.4%, with traders now setting their sights on the next key targets of $0.6949 and $0.7029. Additionally, the Aussie gained 0.3% against the Japanese yen, climbing to 98.42 yen. This upward trend comes after a significant shift in Japan's political landscape, where Shigeru Ishiba, a former defense minister, took the helm of the ruling party, leading to speculation about changes in monetary policy.

Meanwhile, the New Zealand dollar, or 'kiwi,' also experienced a rally, rising 0.5% to $0.6372, marking its highest value since July 2023. This increase was partly fueled by a private survey indicating a rise in business confidence during September. Furthermore, two-year swap rates have stabilized at 3.56%, bouncing back from a two-year low of 3.49%.

Over the weekend, China's central bank made headlines by instructing lenders to reduce mortgage rates by the end of October. Major cities like Guangzhou, Shanghai, and Shenzhen have also relaxed home-buying restrictions, which has had a direct impact on commodity prices. Notably, iron ore prices surged by an impressive 10% on Monday, exceeding $110 per metric ton. This is particularly beneficial for Australia, whose resource sector has played a crucial role in delivering a budget surplus of A$15.8 billion ($10.93 billion) for the fiscal year ending June 2024.

Joseph Capurso, the head of international economics at the Commonwealth Bank of Australia, expressed optimism, stating, "AUD/USD could this week increase above 0.70 for the first time since February 2023." He emphasized that China's authorities have taken decisive action to support the economy, which is expected to have a positive ripple effect on global markets.

Looking ahead, it is important to note that Chinese markets will be closed for a week-long holiday starting Tuesday. On the same day, Australia is set to release retail sales data, with analysts predicting a 0.4% increase following a stagnant previous month. Data from the Commonwealth Bank of Australia indicates that consumers are opting to use tax cuts to pay down debt rather than spend, which could influence future monetary policy decisions.

The recent movements in the Australian and New Zealand dollars reflect a complex interplay of global economic factors, particularly the easing of policies in China. As these currencies continue to gain strength, it will be interesting to observe how they respond to upcoming economic data and the potential for further interest rate adjustments. Investors and consumers alike should stay informed, as these developments could have significant implications for the broader economic landscape.