The Australian and New Zealand dollars strengthened against their most major counterparts in Asian trading on Tuesday as investors bought risky assets on increasing hopes that the U.S. and European central banks will announce some stimulus measures this week.
The Federal Open Market Committee concludes its two-day policy meeting on Wednesday and the European Central Bank on Thursday.
Analysts widely anticipate an interest rate cut by the ECB but are uncertain about the size of the cut or whether it will be accompanied by a deposit-rate cut.
ECB President Mario Draghi stated last week that the central bank is ready to do whatever it takes to preserve the euro. Meanwhile, German Chancellor Angela Merkel and Italian Prime Minister Mario Monti have also vowed to defend the euro amid escalating tensions in Eurozone, close on the heels of a similar agreement between Merkel and French President Francois Hollande.
Adding to positive sentiment, Italy and Spain saw their borrowing costs ease on Monday as investor confidence improved.
The yield on the 10-year Italian bond dropped to 5.96 percent from 6.19 percent on June 28. The 5-year debt fetched a yield of 5.29 percent, down from 5.84 percent at the previous sale on June 28. Elsewhere, Spanish 10-year bond yield fell to 6.59 percent in the secondary market.
The Australian dollar that ended Monday's trading at 1.0505 against the U.S. dollar rose to a fresh 4-month high of 1.0538. The next upside target level for the aussie-greenback pair is seen at 1.060.
In economic news, data from the Australian Bureau of Statistics showed that the number of dwelling units approved in Australia dropped in June, but the rate of decline was weaker than expected by economists.
As many as 13,336 dwelling units were approved in June, which was 2.5 percent less than a month earlier on a seasonally adjusted basis. Economists expected a decline of 15 percent after a strong 27 percent gain in the previous month.
Year-on-year, total dwelling permits increased 10.2 percent. Approvals for private houses declined 7.7 percent annually.
Against the Japanese yen, the Australian dollar climbed to near a 3-month high of 82.44 from yesterday's close of 82.12. On the upside, 83.0 is seen as the next target level for the Australian currency.
The Australian dollar edged up to as high as 1.0544 against the Canadian dollar and if the aussie gains further, it will break yesterday's high of 1.0547 and target the 1.060 level. At yesterday's close, the aussie-loonie pair was quoted at 1.0525.
The New Zealand dollar also strengthened, trading near a 3-month high of 0.8115, compared to 0.8092 hit late New York Monday. The next upside target level for the kiwi is seen at 0.820.
Meanwhile, the NZ dollar jumped to 63.49 against the Japanese yen with 63.7 seen as the next upside target level. The kiwi-yen pair ended yesterday's trading at 63.26.
Looking ahead, Japan's housing starts for June is due at 1 am ET.
German retail sales for June and unemployment rate for July, Swiss UBS consumption indicator for June, Eurozone CPI estimate for July and the unemployment rate for June are slated for release in the European session.
Across the Atlantic, Canada's GDP for May, U.S. personal income & outlays report for June, employment cost index for the second quarter, S&P/Case-Shiller home price index for May, results of the Institute of Supply Management-Chicago's business survey for July and the Conference Board's consumer confidence report for July are expected in the New York morning session.
by RTT Staff Writer
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