SYDNEY: The Australian and New Zealand dollars extended losses on Monday as Asian stocks slid amid uncertainties in the US presidential race and as China’s surprise decision to cut interest rates weighed on the yuan.
The Aussie hit a three-week low of $0.6662 before paring some losses to be down 0.1% at $0.6673.
It had tumbled 1.5% last week, with support now at $0.6667.
The kiwi dollar hit a fresh two-month low of $0.5999, after dropping 1.8% last week to breach key support at the 200-day moving average of $0.6078.
The initial reaction to US President Joe Biden’s decision to drop out of the presidential race has been muted, but Asia’s tech stocks extended Wall Street’s drop on Friday, while a broad market benchmark, the MSCI ex-Japan index, was down as much as 1%.
China’s surprise announcement to cut short- and long-term interest rates also drove the Chinese yuan lower.
The offshore yuan eased to 7.2915 per dollar, from Friday’s close of 7.2839.
The antipodean dollars are often sold as liquid proxies for the yuan for their countries’ economic reliance on the Chinese market.
Australia, NZ dollars eye weekly losses
Zhaopeng Xing, an analyst at ANZ, said China’s rate cut was prompted by its report last week that second-quarter GDP came in lower-than-expected below 5%.
“We cannot rule out another cut in Q4 if Q3 GDP remains below 5%. The slowing momentum will likely continue for the rest of this year,” Xing said.
The soft outlook for the Chinese economy, absent of major stimulus measures, has sent copper and iron prices sliding, another weight on the Australian dollar.
There are no major data releases this week out of Australia or New Zealand.
Swaps currently imply a 20% probability that Australia could hike interest rates next month.
In New Zealand, the chance is 50-50 for a rate cut in August.
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