The Australian and New Zealand dollars skidded to multi-week lows on Thursday after China's central bank fixed its yuan currency far lower than many expected, spurring speculation that it was aiming for a sustained depreciation to boost exports. The Australian dollar dropped to $0.7025 from $0.7061 early, having fallen 1.4 percent on Wednesday. Major support was found at $0.7016 and a break would open the way to a six-year trough of $0.6892 touched in September.
It has skidded three cents in one week amid renewed fears about China and a steep drop in oil prices. Against this backdrop, the Australian dollar looked vulnerable as it is often used as a liquid proxy for China plays. It has shed 10 percent last year. Not helping the outlook were tensions in the Korean Peninsula and falling commodity prices, including iron ore, Australia's top export earner.
The New Zealand dollar fell to a one-month trough of $0.6616, from $0.6636 early. BNZ Currency Strategist Jason Wong said fair value was currently close to the $0.6400 market and he expected "further downward pressure" over the rest of the month. New Zealand government bonds gained, sending yields 3 basis points lower. Yields have fallen over the past few days and "some of the move has reflected a catch-up from offshore post the holidays and illiquid market," said Wong. Australian government bond futures rose, with the three-year bond contract up 4 ticks at 98.040. The 10-year contract gained 4.5 ticks to 97.2750. The 20-year contract was steady at 96.7600.
Comments
Comments are closed.