AUD/NZD pushes higher in risk-on environment

• AUD/NZD firms as the Aussie gets a risk-on boost.
• Evergrande risks are abating, supporting the commodity-related currencies.

At 1.0330, AUD/NZD is 0.2% higher at the time of writing after travelling from a low of 1.0311 to a high of 1.0332. Commodity currencies are in favour and the downtrodden Aussie is benefitting the most from an improved risk-on environment.

Risk appetite improves

The improved risk appetite was reflected in Wall Street's major equity indexes, with the S&P 500 making its largest two-day percentage gain since late July. In yesterday's US session, the Federal Reserve said it will likely begin tapering its monthly bond purchases as soon as November which initially dented stocks and risk appetite. With that being said, traders are taking solace in a positive economic outlook in the Fed's forecasts instead and have cheered the conciliate words from Evergrande's spokespeople.

Evergrande has resolved one coupon payment on a Shenzhen-traded bond but was due to pay $83.5 million in interest on a $2 billion offshore bond on Thursday and also has a $47.5 million dollar-bond interest payment next week. There is a 30-day window to arrange the payments for which the company says it endeavours to settle. 

''Evergrande Chairman Hui Ka Yan urged his executives late on Wednesday to ensure the delivery of quality properties and the redemption of its wealth management products, which are typically held by millions of retail investors in China,'' Reuters reported. 

Overall, ''risks for the AUD seem to be improving, however, sentiment from Asian asset markets will remain key,'' analysts at ANZ Bank said in a note on Friday. 

''Locally there isn’t much to get excited about – the RBNZ will kick off its tightening cycle next month, but with a 25 rather than 50bp hike, but this and follow-on hikes are well priced in already,'' the analysts said, adding, ''delta’s long tail is fading slowly, but we’re not out of the woods, and it’s a while before the next major piece of NZ data.''

Meanwhile, the RBNZ announced further tightening of LVR restrictions, this time targeted at owner-occupiers. ''While this tweak is unlikely to be a game-changer for the housing market, it adds to the growing pile of housing headwinds that have accumulated over 2021,'' analysts at ANZ Bank said.