The Australian dollar advanced to near 1-year highs against a weak US dollar on Wednesday as a recent shift towards riskier assets like high-yielding currencies and stocks gathered pace.
At the local close, Aussie was at $US0.8669, not far from a one-year high of $US0.8677, though it faces strong resistance around $US0.8720. Yesterday it closed at $US0.8609.
The dollar has risen over 2 per cent this month, helped by expectations of rising local interest rates, improved investor confidence in riskier assets and higher commodities.
Gold spiked to $US1016 on Wednesday, while the CRB commodity index rose over 2 per cent the previous session.
The US dollar remained under pressure in Asian trade, with the dollar index falling to fresh one-year lows, as expectations that rates in the US will remain at rock-bottom levels fuelled speculation the greenback was becoming the preferred funding currency for carry trades.
The dollar surged to 13-year highs against sterling at 52.68 pence. The local economy is perhaps the best performing in the developed world with the central bank set to raise rates in coming months from emergency low levels of 3 per cent.
In contrast, the Bank of England is threatening to cut the renumeration rate on bank reserves, indicating the economy was still in need for further help.
"We are of the opinion that until consensus gives up on risk reversal or consolidation, current moves will be extended," said Patrick Bennett, Asian forex and rates strategist at SG.
"Given the underpinning of economic fundamentals and a central bank that is close to hiking rates, the Aussie stands out."
On Tuesday, minutes from the Reserve Bank of Australia's last board meeting highlighted it was almost ready to start raising the cash rate, but needed more evidence that the nascent recovery at home and abroad would be sustained.
The market is pricing in around a 50 per cent chance of a hike to 3.25 per cent in November. Swaps have around 163 basis points of tightening implied for the next 12 months, up from around 150 basis points on Tuesday.
Aussie bill futures fell further on Wednesday, with December contracts down 0.05 points. Bond futures also lost ground, taking cues from US Treasuries which fell after the robust economic data fom the United States.
Three-year bond futures were down 0.02 points at 95.20, while the 10-year bond contract fell 0.005 points to 94.685.
Reuters