Aussie dlr finds energy to climb its one-year peak on the euro

SYDNEY, March 2 (Reuters) – The Australian dollar hit a one-year high against the euro on Wednesday as investors lured by Australia’s status as a net energy exporter and the remoteness European problems.

The euro broke lows last October to bottom at A$1.5274, after losing five cents last month. A break of the 2021 low at $1.5244 would see the Euro drop to depths last visited in mid-2018.

The Aussie also firmed to $0.7280, after hitting a six-week high of $0.7289 overnight. It was now approaching the January high of $0.7314 and the 200-day moving average at $0.7328, and a breakout would be bullish for a run to $0.7370 and $0.7480.

The Kiwi Dollar edged higher to $0.6780, and a break of its recent high at $0.6808 could open the way to $0.6890.

The war in Ukraine and the resulting spike in energy prices have clouded the outlook for European growth and seen markets scale back expectations of when the European Central Bank might tighten policy.

Indeed, futures suggest that some are even betting on another round of stimulus via the ECB’s asset purchases.

Markets also removed nearly 50 basis points of US Federal Reserve tightening for this year and lowered expectations for the Bank of England and Bank of Canada.

Futures have pushed back the likely timing of a first Reserve Bank of Australia (RBA) hike to July, from June, and now see rates at 1.0% by the end of the year rather than 1.25%.

Yields on three-year bonds are also down 20 basis points on the week to 1.36%.

At its policy meeting on Tuesday, the RBA left rates at 0.1% and reiterated that it would be patient on policy although it remained bullish on the economic outlook.

Data released on Wednesday showed the economy rebounded 3.4% in the December quarter as consumers spent with abandon, and there are signs that this has continued this quarter. Read more

Su-Lin Ong, chief Australian economist at RBC Capital Markets, noted that the data suggested households had now accumulated excess savings of around A$280 billion, or 13% of GDP.

“A strong household balance sheet with room for consumption to return to its pre-COVID trajectory, a backlog of housing activity and a recovery in confidence underpin our expectations for strong growth in 2022 and above the trend,” she added.

“But the Ukraine/Russia uncertainty provides additional cover for the RBA’s patient approach.”

Editing by Shri Navaratnam

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