The Australian dollar steadied on Monday after surrendering to its US counterpart in the previous session as investors priced in more risk of a near-term interest rate hike by the Federal Reserve. The Australian dollar is resting around a key chart support, at $0.7541, after falling for three straight days. A breach below that level could see it tumbling to around $0.7490.
It slid 1.3 percent on Friday, its biggest one-day fall in 2-1/2 months. The Aussie hit a three-week high of $0.7732 last week but once again failed to stay above 77 US cents.
Both the Aussie and the New Zealand dollar were also bruised as traders unwound carry trade positions in high-yielding currencies for safe havens such as yen.
"The Aussie came under a lot of pressure when the risk-off mood set in," said Greg McKenna, chief market strategist at FX and CFD provider AxiTrader.
Boston Fed President Eric Rosengren said in a speech on Friday that gradual interest rate increases might be in order with the US economy at full employment and that low interest rates were increasing the chance of an overheated economy.
Locally, Reserve Bank of Australia Assistant Governor Chris Kent is due to give a speech on Tuesday followed by jobs data on Thursday.
"At this stage, levels around 75 US cents have been the accumulation zone for traders. A break would be big news," McKenna said.
The New Zealand dollar edged up to $0.7330 in Monday morning trading, gaining back some of the heavy losses that began late last week when it was as high as $0.7482.
Investor sentiment has been buoyed by expectations data this week would show New Zealand's economy (GDP) enjoyed strong growth in the second quarter.
"Q2 GDP figures are set to confirm an acceleration from earlier in the year. When accompanied with a narrowing current account deficit and improved dairy prices giving the growth a more sustainable feel, there is plenty to cheer," said Con Williams, an economist at ANZ Bank.
New Zealand government bonds slid in line with a global sell off, sending yields 11 basis points higher at the long end of the curve.
Australian government bond futures also fell, with the three-year bond contract down 6 ticks at 98.415. The 10-year contract was off 9 ticks at 97.9275, having hit its lowest in 11 weeks.
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