May 19, 2020 / 4:36 AM / 13 days ago

Australian dollar buoyed by reopening hopes, but resistance looms

SYDNEY, May 19 (Reuters) - The Australian and New Zealand dollars hung onto hefty gains on Tuesday as progress on reopening the global economy and optimism about an eventual coronavirus vaccine boosted equities and commodity prices.

The Aussie was holding at $0.6527, having climbed 1.7% overnight amid a general improvement in risk appetite. It now faces stiff resistance at $0.6570, a top from late March, and a break there would open the way to the next major chart target at $0.6885.

It was also testing resistance against the Japanese yen having jumped 2% on Monday to reach a three-month peak at 70.34 . A close above former highs at 70.16 would be a bullish signal for a move to 71.50.

The kiwi dollar was up at $0.6039, after rising 1.7% overnight and away from a low around $0.5921.

At home, minutes of the Reserve Bank of Australia’s May policy meeting showed it saw an “unprecedented” economic contraction this quarter, but also felt policy stimulus would help bring recovery.

Data showed job losses had slowed since the initial lockdown-driven collapse in late March and early April. Wages paid had also stabilised after a steep early dive.

“There are early signs of workers rejoining their employers. That creates potential for higher incomes, spending and confidence,” said Craig James, chief economist at CommSec.

“Australia has been a relative global outperformer when it comes to containing the virus,” he added. “But it’s too early to claim victory as a restart of the economy may see virus clusters continue to emerge over the winter months.”

There was some disappointment at China’s decision to slap hefty tariffs on imports of Australian barley, but that was offset by a continued climb in the price of iron ore - Australia’s single biggest export earner.

Dalian iron ore futures jumped as much as 7.5% on Monday as China’s port inventory of the steelmaking raw material dropped to the lowest in more than three years.

Rising prices and strong shipments of the ore had already helped deliver Australia’s largest trade surplus ever in March, and another bumper result looked likely for April.

New Zealand’s central bank said it could expand its bond buying programme though it hopes to have more certainty in about three months on whether to go harder or take the foot off the accelerator. (Editing by Shounak Dasgupta)

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