The Australian and New Zealand dollars were cowed by global growth concerns on Monday, while bonds extended their recent eye-popping rally to drive many yields to all-time lows. The Aussie dollar was stuck at $0.7075, having failed miserably to hold last week's brief top at $0.7168. Support comes in at $0.7057 and $0.7040.
The kiwi fared a little better at $0.6875, but was still well short of its recent high of $0.6938. It has support at $0.6828, with resistance around $0.6890. A general rush to safety mostly benefited the Japanese yen, slapping the Aussie down almost 1.2 percent on Friday to last stand at 77.85.
Yields on 10-year Australian bonds have dived almost 20 basis points in just a week to hit record lows at 1.77 percent. New Zealand's 10-year bonds were also at that historic milestone with a drop to 2.008 percent.
The 10-year futures contract added another 6 ticks on Monday to reach an all-time peak of 98.2250.
Yields on Australian three-year paper sank to just 1.40 percent, the lowest since August 2016. That was also under the 1.5 percent cash rate, a clear sign markets are wagering on a rate cut form the Reserve Bank of Australia (RBA).
Futures are almost fully priced for a quarter-point easing by September, though that timing was pushed out a little last week when data showed the jobless rate unexpectedly dipped to 4.9 percent in February.
The Aussie slide followed disappointing manufacturing surveys from across the globe, and especially Europe, which weighed on risk sentiment and prices for industrial commodities, including copper.
"Our AUD short term model suggest fair value is currently at $0.7186, so in spite of Friday's risk aversion, the AUD/USD still looks a little bit undervalued," said Rodrigo Catril, a senior FX strategist at NAB.
"Sharper declines in commodity prices and a VIX at least above 25 are probably needed for the AUD/USD fair value to sink below $0.7000," he added, referring to the volatility index which jumped almost 3 points to 16.48 on Friday.
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