The Australian and New Zealand dollars looked set to claim...

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    The Australian and New Zealand dollars looked set to claim hefty weekly gains on Friday as investors globally rushed to price in a global economic recovery, even as data underlined the severe damage done by coronavirus lockdowns.

    The Aussie was at $0.6977 AUD=D3 , having climbed 4.6% for the week so far to reach a five-month peak at $0.6988. That took it a long way from the 17-year low of $0.5510 struck during the market mayhem of mid-March.

    The next barriers are $0.7000 and the $0.7032 top from late December. Support lies at $0.6944 and $0.6882.

    The kiwi dollar had flown to $0.6488 NZD=D3 , again a rise of almost 4.6% for the week. It also cleared the March top of $0.6448 to reach levels last seen in mid-February.

    Both currencies have been carried along on a wave of optimism about reopening economies which has lifted stocks and some key commodities. The Aussie has had a particularly strong correlation to the S&P 500 as a barometer of risk appetite.

    Such were the gains that traders were wondering whether the Reserve Bank of Australia (RBA) might be getting uncomfortable with the currency's strength given it was making exports less competitive and effectively tightening financial conditions.

    Daniel Bean, head of FX research at ANZ, noted that the RBA historically focused on the valuation of the Aussie rather than any particular level.

    " The rally has come from a position of currency undervaluation and is aligned to improvements in both risk appetite and global growth prospects," he said.

    "As a result, at this stage, the move is unlikely to warrant attention from the RBA," he added. "But if the AUD continues to rise, despite scant evidence of a robust global growth recovery, the RBA is likely to be more circumspect."

    The move to front-run an economic recovery has taken a toll on bond prices, pushing yields on 10-year bonds AU10YT=RR to 11-week highs at 1.128%.

    Three-year note yields AU3YT=RR have also crept up but only by a couple of basis points to 0.28% as the market respects the RBA's commitment to keeping those yields near 0.25%.

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