The Australian and New Zealand dollars fell for a third consecutive session on Wednesday as a slide in commodity prices sent investors to safe assets such as bonds. The Australian dollar dropped to $0.7077, from $0.7087 early, having shed two cents since Friday. Much of the weakness came on speculation the Federal Reserve is still on track for an interest rate hike before the end of the year.
Also undermining the Aussie was worries about global growth and fears of a hard landing for the economy in China, Australia's top export market. "If the headline reading avoids a new multi-year low then AUD/USD should be able to hold above $0.7037 support but overall the bias on the day should be to sell rallies," said Sean Callow, a senior currency strategist at Westpac.
Resistance was found around $0.7100. Across the Tasman sea, the New Zealand dollar eased to $0.6286, having fallen nearly 2 percent this week, but it was still in the well-defined range of $0.6244 to $0.6458 seen so far this month. It popped to a three-week peak last week, but like its Aussie counterpart, ran out of puff on diverging rate outlooks between the United States and most Western nations.
A jump in US treasury bonds sent New Zealand government bonds higher with yields 6 basis points lower at the longer end of the curve. Likewise, Australian government bond futures rose, with the three-year bond contract up 3 ticks at 98.120. The 10-year contract added 7 ticks to 97.2850, leading to a bullish flattening of the curve.
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