The Australian and New Zealand dollars maintain their gains ahead of US inflation data

The Australian and New Zealand dollars maintained their gains on Tuesday, supported by a yuan reversal and a weaker dollar, as traders awaited US inflation data to assess whether interest rates have peaked.

The Australian dollar is hovering at 0.6432 US dollars, after it rose 0.8% overnight to the highest level in a week at 0.6449 US dollars, and emerged from a narrow range in which it had been stuck since it reached its lowest level in ten months last week. The bulls are now targeting $0.6520.

The New Zealand dollar also remained stable. It traded at $0.5920 after rising 0.6% overnight to $0.5935. Near-term resistance is at $0.5930 and support is strong at the 10-month low of $0.5860 hit last week.

“Improving risk appetite, evidenced by gains in equity markets as well as appreciation of the Japanese yen and Chinese yuan, has led to positive effects on the Australian dollar and New Zealand dollar,” said Rodrigo Catril, chief FX strategist at National Australia Bank.

The Japanese yen and the Chinese yuan rose on Monday on advice from their respective central banks, and rebounded after the recent sharp rise in the US dollar. Chinese credit data showed an increase in new loans, which also helped the yuan.

In Australia, surveys showed that consumer sentiment remained low. Business conditions remained steady, but the cost pressures facing businesses remained high, a finding that could strengthen the case for further tightening by the Reserve Bank of Australia.

In New Zealand, the government, facing elections in October, forecast a larger budget deficit but better-than-expected economic conditions for next year. The news had little impact on Kiwis (Reporting by Stella Chiu, Editing by Edwina Gibbs).