The Australian dollar fell to four-month lows on Thursday, while the New Zealand dollar was vulnerable after the Federal Reserve remained upbeat on economic growth, setting a fire under the US dollar. The Australian dollar skidded to $0.7408, its lowest since mid-January, having dropped around a US cent and a half on Wednesday. It has lost 1 percent so far this week, largely due to a shakeout in Aussie long positions.
"A break of the $0.7400 level will send the Aussie longs running for the exit and could add more fuel to the downside momentum," said Stephen Innes, a senior trader at OANDA. The next level of support was found at $0.7385, the 61.8 percent retracement of the January-February move. The New Zealand dollar edged up to $0.6882, having recouped some losses from Wednesday's session when it shed 0.8 percent.
Still, it was within reach of a 10-month trough of $0.6847 set last week. Immediate support was found at $0.6870 and resistance at this week's high of $0.6969. It has erased nearly all the gains made earlier in the week following a solid global dairy price auction and a strong jobs report. New Zealand government bonds eased, sending yields 3.5 basis points higher at the long end of the curve.
Australian government bond futures fell, with the three-year bond contract down 4 ticks at 98.110. The 10-year contract shed 4.5 ticks to 97.3350, while the 20-year contract was steady at 96.7550. Much of the Aussie weakness came after the Fed made positive comments on the job market, reinforcing expectations of a rate hike in June. Also undermining the Aussie was a sharp 6.5 percent fall in iron ore on Wednesday. Iron ore is Australia's top export earner. Markets found little comfort from a lower-than-expected Australian trade surplus, which slowed to A$3.1 billion in March from A$3.6 billion in February.
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