SYDNEY, May 31 (Reuters) – The Australian dollar rose on Monday to be on track for its second consecutive month of gains, ahead of a monetary policy meeting at its relatively accommodating central bank supported by high commodity prices. raw materials.
The Aussie was trading 0.19% higher at $ 0.7723, although closer to the lower end of its May range of $ 0.7675 to $ 0.7891, as investors wait for news Reserve Bank of Australia (RBA) Tuesday after its June meeting.
The New Zealand dollar was trading 0.12% higher at $ 0.7257 and is on track for a 1.37% monthly gain, rallying last week after the Reserve Bank of New Zealand signaled rate hikes as early as the middle of next year, making it one of the only handful of central banks to talk about tightening.
Monetary strategists expect the RBA to reaffirm its forecast of a cash rate remaining at record levels “until 2024 at the earliest,” which will highlight the growing gap between the RBA’s position and that of its global peers.
Investors will also look forward to Australian economic output figures for the first quarter of 2021, which are expected to be released on Wednesday.
“The RBA remains motivated to avoid an unwanted bullish move in the Australian dollar,” said GSFM investment strategist Stephen Miller.
“Any upward movement in the AUD could well prevent the task of reducing unemployment and increasing wage growth and inflation. The RBA also appears largely indifferent to market expectations of a rebound in inflation. Like the Fed, this may reflect the belief that any short-term inflation will be essentially transitory. “
As the Australian economy has recovered faster than expected, Victoria state’s latest week-long coronavirus lockdown would affect growth this quarter and provide further reason for the RBA to remain accommodative.
Illustrating investor caution ahead of the RBA meeting, Australian 10-year bond yields rose one basis point to 1.64%. New Zealand bond yields for the same maturity were trading four and a half basis points down to 1.85%. (Edited by Muralikumar Anantharaman)