SYDNEY: The Australian and New Zealand dollars struggled to make new ground on Tuesday even as Wall Street soared to a record close, with sentiment still being weighed down by a lack of stimulus measures from China after a slew of lacklustre data.
The Aussie fell 0.2% at $0.6712, having fallen 0.4% overnight to as far as $0.67, the lowest in a month. The currency, however, has support at 67 cents, although it is looking vulnerable for a move lower.
The kiwi dollar was trading 0.2% lower at $0.6082, after slipping 0.2% overnight.
It faces heavy resistance at the 200-day moving average of $0.6095.
The two currencies are often sold as liquid proxies for the Chinese yuan as China is the top trading partner for Australia and New Zealand.
The offshore yuan weakened on Tuesday about 0.4% to 7.1260 per dollar, the lowest in a month.
A frenzied rally in Chinese stocks has also subsided in recent days with investors stepping back to see when and where government support will be directed at the world’s second-biggest economy.
Data on Monday showed export growth - the lone bright spot in the Chinese economy - slowed sharply in September.
A media report from Caixin that China may raise an additional 6 trillion yuan ($850 billion) over three years to fund fiscal stimulus helped the Australian dollar bounce off lows, analysts said.
“AUD, NZD and CNH will remain sensitive to any news around expected Chinese fiscal stimulus,” said Kristina Clifton, an economist at the Commonwealth Bank of Australia (CBA), adding that the Aussie rebounded 35 pips after the report.
Australia, NZ dollars under pressure as China’s fiscal stimulus disappoints
Clifton expects more details from the National People’s Congress meeting later this month.
In the broader foreign exchange market, the dollar is getting some support on bets that the US Federal Reserve will opt for a small 25-basis-point rate reduction in November, with two Fed officials supporting modest easing.
In contrast, the Reserve Bank of Australia is seen only cutting its cash rate next February, with just 40% priced in for a move in December.
Card data from the CBA on Tuesday showed consumer spending dropped in September after a strong showing in August, while Westpac said spending rebounded 1.1% in the third quarter, representing just a small boost given the size of the fiscal stimulus rolled out.
New Zealand will release its third-quarter inflation figures on Wednesday that could shift bets on the size of a potential rate reduction in November.
Markets are leaning towards a half-point cut from the Reserve Bank of New Zealand, which is 88% priced in, while a quarter-point move is seen as an 11% chance.
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