Australia dlr at 2-year peak, NZ$ cautious ahead of Q2 inflation


By Swati PandeySYDNEY/WELLINGTON, July 17 (Reuters) - The Australian dollar
soared to a two-year high on Monday while its New Zealand cousin
paused at a 4-1/2 month peak as risk-on sentiment dominated amid
diminishing worries of aggressive policy tightening in the
United States.
    Aussie bulls were also motivated by stronger-than-expected
economic data from China, Australia's No.1 trading partner.
    China reported second-quarter gross domestic product
expanded 6.9 percent on the year, driven by strong industrial
output, exports, retail sales and investment. [nL3N1K81AY]
    The Australian dollar <AUD=D4> climbed to $0.7839, a level
last seen on June 2015, after breaching major chart resistance
in the $0.7700/7778 range. The Aussie was last at $0.7812 with
bulls targetting the 200-week moving average around $0.8026.
    "China's GDP data is quite encouraging for Australia. That
suggests continued demand for Australian goods, including
tourism," said Craig James, Sydney-based chief economist at
CommSec. "It is encouraging for global growth as well because
China is the second largest economy on the planet."
    The Aussie has been climbing tirelessly since last week
following comments from the U.S. Federal Reserve Chair Janet
Yellen that sounded less hawkish than some had feared.
    That sent a green light for risk-taking, boosting carry
trades where investors favour high-yielding currencies such as
the Aussie and the Kiwi over safe haven assets.
    "The talk over the weekend and today is around the moves in
the AUD. It's on fire," said Chris Weston, Melbourne-based chief
market strategist at IG Markets.
    "...The combination of positively trending global equities,
low volatility, widening nominal and real bond yield
differentials and outperformance from emerging markets clearly
makes the AUD the vehicle of choice to express this thematic -
the hunt for carry and yield is alive."
    Across the Tasman Sea, the New Zealand dollar <NZD=D4> was
down 0.41 percent at $0.7318, from a high of $0.7369 touched
last week, ahead of second-quarter inflation data due on
    Consumer prices likely rose only 0.2 percent from the
January-March period, while the annual pace is forecast to slow
to 1.9 percent. Such a pullback could strengthen the central
bank's resolve to keep interest rates at record lows for some
time to come.
    New Zealand government bonds <0#NZTSY=> eased, sending
yields 1-1.5 basis points higher on the long end of the curve.
    Australian government bond futures were mixed, with the
three-year bond contract <YTTc1> down 1 tick at 98.00. The
10-year contract <YTCc1> was flat at 97.2850.

 (Editing by Kim Coghill)
 ((swati.pandey@thomsonreuters.com; +61 2 9321 8166; Reuters
Messaging: swati.pandey.thomsonreuters.com@reuters.net;


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