SYDNEY: The Australian and New Zealand dollars cratered at 10-month lows on Friday as coronavirus lockdowns undermined their economies and pushed out policy tightening, sparking a steep drop in bond yields.

The Aussie dollar lay in tatters at $0.7138 having dived an eye-watering 3.2% for the week so far, the largest fall in almost a year.

A break of the 200-week moving average at $0.7223 had turned the technical outlook deeply bearish and opened the way to the next target at $0.6990, a trough from November last year.

The kiwi dollar had shed 3.1% on the week so far to $0.6820 , again the biggest drop since September last year. The next target is the 200-week average at $0.6760 and then $0.6590.

Both currencies have been upended by the spread of the Delta variant at home, with Sydney extending a strict lockdown out to the end of September while New Zealand lengthened its national lockdown to next week.

The latter forced the Reserve Bank of New Zealand (RBNZ) to delay a rate hike this week and markets are now pricing only a one-in-three chance of a move at its October meeting.

The Reserve Bank of Australia (RBA) was still planning on tapering its bond buying in September but the lockdowns and a disappointingly weak reading on wages argue for a dovish stance.