SYDNEY, Oct 27 (Reuters) - The Australian and New Zealand dollars held firm on Tuesday as both countries’ relative success in combating COVID-19 supported local sentiment in the face of a darkening global outlook.
The Aussie was up 0.1% at $0.7131, comfortably above its recent low of $0.7018 and not far from the next major resistance barrier at $0.7158.
The kiwi dollar was a shade firmer at $0.6683, again well above last week’s trough of $0.6551 and nearer resistance at $0.6704.
While the resurgence of the coronavirus is threatening economic growth in Europe and the United States, most of Australia has little to no new cases and the country’s second largest city Melbourne is finally re-opening having contained a major outbreak.
This relative success helped consumer confidence climb to an eight-month high, according to a weekly survey from ANZ. “People remain cautious about the current economic outlook,” said ANZ’s head of Australian economic David Plank.
“But confidence in future economic and financial conditions is much more positive...holding out the prospect of a recovery in spending if the labour market holds up.”
Another positive for the Aussie was the continued inflow of foreign equity bids, the latest being an A$9.28 billion ($6.6 billion) offer for Coca-Cola Amatil Ltd.
“The recent run of M&A news is an important reminder of just how supportive equity capital flows have been and remain,” said Westpac’s head of FX strategy Richard Franulovich.
He noted that over the past year Australia had run an A$77 billion surplus on goods and services, equal to 5.2% of GDP, and a net foreign equity inflow of A$56 billion.
“We see AUD capped by $0.7170/$0.7200, with a break of key $0.7010/20 support required for a move lower,” he added. “We see any dip as a good buying opportunity for strength into the end of the year and beyond though.”
Government bonds remained underpinned by expectations the Reserve Bank of Australia (RBA) will launch a full quantitative easing campaign at its policy meeting in a week’s time.
Most analysts assume the bank will cut the cash rate to 0.1%, from the current 0.25%, and lower its target for three-year bond yields to the same level. Three-year bond futures already largely price that in at 99.840, implying a yield of 0.16%. (Editing by Shri Navaratnam)
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