SYDNEY, Feb 25 (Reuters) - The Australian and New Zealand dollars climbed to multi-year peaks on Thursday as a global rush into reflation plays swung commodity prices and bond yields sharply in their favour.
The Aussie was enjoying the rarefied air at $0.7960 , having reached heights not visited since early 2018 at $0.7979. It was up 1.2% on the week as momentum funds piled in on the break of major chart barriers, particularly against the yen and euro.
The next target is the psychological 80 cent level and a peak from Jan. 2018 at $0.8136.
The kiwi dollar climbed to $0.7430, clearing its 2018 top to reach levels not seen since August 2017. The next major target is the peak for all of 2017 at $0.7557, and a break there would take it to levels last visited in mid-2015.
“For Australia, the combination of buoyant commodity prices and decent export volumes means that resource-related export receipts have been healthy,” said CBA head of Australian economics Gareth Aird.
“Prices are expected to remain elevated and that will generate ongoing large trade surpluses which will support the Australian dollar.”
Miners have paid out bumper taxes and dividends in Australia, so turning U.S. dollars earned into Aussie dollars.
The reflation trade has combined with upbeat economic data at home to fuel a major rise in bond yields well beyond that seen in the U.S.
Australian 10-year yields shot up to 1.705%, the highest since May last year and a jump of 29 basis points this week alone. The spread over Treasuries widened out to 30 basis points, from zero a couple of weeks ago.
The Reserve Bank of Australia (RBA) stepped in on Thursday to buy A$3 billion of 2023 to 2024 bonds aiming to stop three-year yields rising further above its target of 0.10%.
It had limited success dragging three-year yields off to 0.14%, from a high of 0.168%.
In New Zealand, 10-year yields have rocketed 33 basis points so far this week to reach 1.865%, the largest weekly rise since 2013.
The Reserve Bank of New Zealand (RBNZ) on Wednesday pledged to be patient on policy and not tighten for some time, though it noted the global move in yields was beyond its control.
The country’s government has also just mandated the RBNZ pay account of house prices when setting policy, a tricky task given record low rates have sent prices booming in recent months.
(Reporting by Wayne Cole; Editing by Christopher Cushing)