Dollar holds gains despite weak data
The Australian dollar has shot up to fresh four-year peaks on the yen and held ground against its US counterpart, while bond prices fell to their lowest since May as major support levels finally gave way.
The Aussie was at 96.63 yen in late trade after earlier flying to 96.78 yen, its strongest levels since August 2008. It has gained more than 17 per cent since November on the belief that reflation in Japan would require a much weaker yen.
Against its US counterpart, the Aussie rose to $US1.0425, from $US1.0404 early, having recovered from a low of $US1.0362 hit on Friday.
Against the euro, the dollar stabilised at 76.5 euro cents, up from 76.22 earlier in the day and off a reent low of 75.81 euro cents.
The Aussie was underpinned by stronger Asian bourses and rising commodity prices after solid manufacturing data from the United States, Europe and China late last week.
The spot price of iron ore, Australia's top export earner, climbed to $US153.20 a ton to be up 76 per cent from last year's lows.
"While the AUD is strong and will continue to weigh on domestic demand indicators... global factors suggest AUD should remain buoyant," summarises Greg Gibbs, a strategist at Royal Bank of Scotland in Singapore.
This explained why the Australian dollar has been resilient to a run of surprisingly weak data including a fall of 4.4 per cent in building approvals and a continued drop in job ads.
Other data out on Monday included a private gauge of Australian inflation which showed price pressures were restrained in the first month of the year, suggesting there was still scope to cut interest rates further.
The Reserve Bank of Australia (RBA) holds its monthly policy meeting on Tuesday but markets imply less than a one-in-five probability of an easing to a record low 2.75 per cent.
A Reuters poll of 23 analysts found all but one expected an unchanged outcome this month, though many saw a chance of further easing as the year progressed.
Australian government bond futures plumbed nine-month lows, tracking a fall in US Treasuries. The three-year contract dived to 97.03, its weakest since May, having pierced heavy support around 97.10.