The Australian and New Zealand dollars hovered near multi-month highs on Wednesday while bonds took a beating as surprisingly strong domestic data and more promising news on coronavirus vaccines underpinned risk assets.
The Aussie was a shade firmer at $0.7378 and just off a three-month high of $0.7408. It still faces stiff resistance at the September peak of $0.7413 but a break would take it to ground last trod in mid-2018.
The kiwi dollar held at $0.7057 after having reached $0.7072 at one stage, the highest since April 2018. The break of chart resistance at $0.7060 added to the bullish outlook, though many technical indicators are overbought after weeks of gains.
Data showed Australia's economic growth rebounded by a record 3.3% in the third quarter as an easing in pandemic restrictions unleashed pent-up consumer demand.
With the virus now all but contained in Australia, growth looks likely to be solid this quarter too.
Reserve Bank of Australia (RBA) Governor Philip Lowe called the figures "good" news, while noting there was a long way yet to full recovery.
Lowe said he had an "open mind" on whether to expand the RBA's A$100 billion ($73.80 billion) bond-buying programme and much would depend on how the economy fared and whether other central banks were still easing policies.
Kim Mundy, a senior economist at CBA, reckoned the RBA would also have to reconsider its 0.1% target for three-year bond yields if the economy continued to outperform.
"We expect the RBA will either remove or increase the target yield by the middle of next year, which will further support AUD in 2021," said Mundy. "We expect AUD will lift to $0.7800 by year-end."
The upbeat data added to selling pressure on bonds, which had already been hit by a sharp jump in Treasury yields amid renewed talk of possible U.S. fiscal stimulus. [US/]
Yields on Australian 10-year bonds climbed 7 basis points to 0.998%, and back near a November top of 1.006%. The 10-year futures contract slid 8 ticks to 99.0050.
The RBA has been buying longer-dated bonds in part to try and keep yields down and lessen any increase in the Aussie.
($1 = 1.3550 Australian dollars)
(Editing by Subhranshu Sahu)
