The Australian and New Zealand dollars were off lows on Monday, as appetite for risk grew following a slight easing in the Ukraine-Russia conflict, while optimism over the outlook for China's economy underpinned demand. The Australian dollar nudged up to $0.9278, from a two-month low of $0.9229 set on Friday. It managed to recover some ground against the yen at 94.75 yen, having sunk nearly one yen during Friday to touch 93.88, the lowest since late May.
"Previous flare-ups of geopolitical tensions have failed to leave a lasting impact on the currency," said Will Richardson, a strategist at Macquarie Bank, seeing offers at $0.9310 ahead of $0.9370/80. The Aussie has shown a noteworthy resilience, having fallen a moderate 0.4 percent last week in spite of a shock jump in unemployment and a downgrade in the central bank's forecasts for economic growth.
The latest reprieve for the Aussie came as risk appetite improved, lifting stocks and metals. Also helping was China's buoyant exports in July, fuelling optimism about global demand. The Antipodean currencies are sensitive to news out of China, a key export market for both Australia and New Zealand. The Aussie remained stuck in the 92 to 95 cents range since April with support found around $0.9205/10.
The New Zealand dollar slipped to a session low of $0.8459 before clawing back to $0.8465. It was still hovering near a two-month low of $0.8423 hit late last week. The kiwi has retreated from a near three-year high of $0.8839 hit last month, but demand for the currency's higher yield has provided some cushioning during the latest bout of risk aversion selling. Technical support was seen at $0.8462, its 200-day moving average, while more support lay at $0.8446, the 50 percent retracement of the kiwi's lowest and highest levels hit so far this year. Still, market participants said it could suffer more on geopolitical concerns, while an improvement in the US economy could boost the greenback versus the kiwi.
A further fall in global prices for dairy products could also hurt the currency, given that dairy is New Zealand's biggest export earner. New Zealand government bonds slipped, adding up to 5 basis points along the yield curve. Australian government bond futures skidded, with the three-year bond contract down 11 ticks to 97.390. The 10-year contract shed 12.5 ticks to 96.600, from a 14-month peak of 96.740. Yields on 10-year Australian government bonds were at 3.40 percent, having bounced from 3.31 percent, the lowest since June last year.