Dollar shoots to 5-week high

The local unit pulled back from US75c in late trade, but remained sharply higher.

The Australian dollar has briefly surged above US75 cents to its highest level in more than a month. At 5pm (AEST on Thursday, the local unit was trading at US74.70c, up from US74.40c on Wednesday.

The currency hit US75.07c earlier in the session, its highest level since May 5, before retreating.

The Aussie is being boosted by the nation’s resilient economy, weakness in the greenback and recovering commodity prices, Commonwealth Bank of Australia chief currency strategist Richard Grace said.

“We have strong evidence the Australian economy is doing well,” he said.

First quarter gross domestic product grew at its fastest pace in more than three years, and the jobless rate continues to drift lower, Mr Grace said.

A bounce in commodity prices, with crude oil prices now above $US50 per barrel and iron ore prices rising, are another factor, he said.

The US dollar has been licking its wounds near four week lows after disappointing US jobs data quashed expectations of a near term Federal Reserve rate hike.

Mr Grace said the Aussie’s strong run is unlikely to continue. “We’re looking for 73 US cents by the end of June, and year end,” he said.

“What we need now to push it any higher is fresh information coming from global factors, or here in Australia, and we’re unlikely to get that this week.” At 1700 AEST, the Australian dollar was at 79.71 Japanese yen, up from 79.68 yen on Wednesday, and at 65.55 euro cents, up from 65.43 euro cents.

The bond market enjoyed an unusually strong rally despite little news or economic data to drive direction.

RBC Capital Markets fixed income and currency strategist Michael Turner said trades ahead of next Wednesday’s rollover of futures contracts may have pushed prices higher.

“There’s been a little bit of volatility around that, given large parts of the investment dealer community need to perform fairly chunky transactions that sometimes don’t go through smoothly,” he said.

“That’s our guess as to what’s happening a the moment.” At 1630 AEST, the June 2016 10-year bond futures contract was trading at 97.905 (implying a yield of 1.095 per cent), up from 97.850 (2.150 per cent) on Wednesday.

The June 2016 three-year bond futures contract was at 98.445 (1.555 per cent), up from 98.430 (1.570 per cent).

AAP