Monday, the Australian and the New Zealand dollars soared against most major currencies as a rise in Asian and European stocks boosted demand for higher-yielding currencies.
Higher-yielding currencies such as the Australian and the New Zealand dollars tend to benefit when investors’ risk appetite rises, while funding currencies such as the low-yielding yen and dollar tend to fall.
Asian stocks rose on strong corporate earnings and as investors shrugged off news that Chinese manufacturing shrank in July. On the back of a rise in Asian stocks, the aussie and the kiwi rose in early Asian deals, but the currencies largely showed choppy trading in late trading.
However, as the European stocks too opened the day in green, the aussie and the kiwi soared again in early European deals and broke Asian session highs and climbed further.
Japan’s Nikkei 225 index rose 0.35%, Hong Kong’s Hang Seng climbed 1.8%, China’s Shangai composite index soared 1.3%, New Zealand’s NZX 50 index jumped 0.3%, South Korea’s Kospi gained 1.3%, Taiwan’s main index edged up 1.95%. Australia’s S&P 200 index advanced 1.1% and the All Ordinaries index was 1.0% higher.
In Europe, Germany’s DAX climbed 1.3% in early deals, France’s CAC 40 index soared 1.9% and U.K.’s FTSE 10 index gained 1.6%.
On the economic front, a statement released by the Australian Industry Group in association with PriceWaterhouseCoopers in Australia revealed that the manufacturing sector in the countryrose in July, on the back of stronger levels of production, new orders and deliveries. The Australian Industry Group / PricewaterhouseCoopers performance of manufacturing index rose to 54.4 from 52.9 in the previous month.
A separate report released by TD Securities in association with Melbourne Institute revealed that an estimate of consumer inflation in the country slowed sharply in July from the previous month. As per the report, the TD Securities/Melbourne Institute inflation gauge rose 2.8% year-on-year in July, slower
than the 3.6% increase registered in the previous month. On a monthly basis, the gauge increased 0.1% in July.
The Australian dollar rose against the US currency in early European deals on Monday. As of now, the aussie-greenback pair is trading near a 3-month high of 0.9137, compared to Friday’s close of 0.9052. On the upside, 0.933 is seen as the next target level for the Australian dollar.
During early European deals on Monday, the Australian dollar climbed against the Japanese yen. The aussie-yen pair that closed last week’s trading at 78.23 is now trading at a 5-day high of 79.34. The next upside target level for the aussie is seen at 79.5.
The Australian dollar spiked up against the euro during early European session on Monday. The aussie is currently trading near a 5-week high of 1.4313 against the euro, compared to 1.4414 hit late New York Friday. If the Australian currency gains further, it may likely target the 1.396 level.
In early European deals on Monday, the New Zealand dollar advanced against the currencies of US and Japan. At present, the kiwi is trading at a 6-day high of 0.7343 against the greenback and a 5-day high of 63.77 against the yen. The next upside target level for the kiwi is seen at 0.740 against the greenback and 64.7 against the yen. The kiwi-greenback and the kiwi-yen pairs were worth 0.7260 and 62.75, respectively at Friday’s close.
The New Zealand dollar strengthened against the euro in early European deals on Monday. Presently, the kiwi is trading at a 5-day high of 1.7806 against the euro with 1.762 seen as the next upside target level. The euro-kiwi pair closed last week’s trading at 1.7980.
The final manufacturing PMI reports for July from the major European economies, which were released in early European deals likely influenced the euro.
Looking ahead, the U.S. ISM manufacturing index for July and construction spending report for June are expected in the New York morning.