The New Zealand dollar plumbed six-month lows on Tuesday as a surprisingly large trade deficit provided speculators with a fresh excuse to sell, while its Australian cousin held its own in the face of a broadly stronger US dollar. The kiwi extended losses to as far as $0.8311, its weakest since late February. It was last at $0.8343 and has shed more than 5 cents since it hit a three-year peak in July.
It moved a notch lower after data showing a larger-than-expected trade deficit in July highlighted the ongoing fall in dairy prices, the country's main export earner. The kiwi underperformed most major currencies, particularly the Aussie which hit a nine-month high around NZ$1.1170.
Against a currency basket the kiwi fell to 78.52, its lowest since March and well below the Reserve Bank of New Zealand's quarterly projections. The Australian dollar was relatively stable at $0.9293, having bounced from a low of $0.9272 in early trade. It has showed remarkable resilience in recent days against a broadly rising US dollar and remained well within the 92-95 cent band seen since March. Support was found at $0.9270, with resistance around $0.9315.
It stayed strong on the euro at A$1.4200, after touching a 9-month peak of A$1.4181. Charts are bearish on the euro and a break of A$1.4043 would open the way to A$1.3859 and then to A$1.2213, the 2013 trough. The euro has been pressured by rising expectations of another round of policy easing by the European Central Bank. The Aussie retreated from a near 15-month high of 97.27 yen to be at 96.51.
New Zealand government bonds rallied, tracking gains in US Treasuries and pushing yields on most maturities 4.5 basis points lower. Australian government bond futures bounced, with the three-year bond contract up 3 ticks at 97.340 and off a three-week low. The 10-year contract added 6 ticks to 96.635 in a bullish flattening of the curve.