The Australian and New Zealand dollars nursed deep losses on Wednesday as the US dollar outfought all contenders, while rising market volatility pushed investors to the safety of sovereign debt. Australian three-year bond futures jumped 7.5 ticks to 98.125, while the 10-year contract leapt 10 ticks to 97.4560, having touched a six-month trough on Monday.
The European Central Bank launched its massive campaign of quantitative easing this week, sending yields on the debt of nearly all euro zone countries to record lows and enhancing the attractiveness of markets such as Australia. That also helped the Aussie gain on the euro, which skidded to $1.4025 and near lows last seen in September. It had no such luck against the US currency where it struck a six-year trough of $0.7603 before steadying at $0.7634. A break of 76 cents would target $0.7451, the lowest since May 18 2009.
The Aussie has dropped 1 percent in three sessions, largely on diverging interest rate outlooks between the Federal Reserve and the rest of the developed world, including Australia. Not helping the Aussie was a measure of Australian consumer sentiment dipping from 13-month highs in March as concerns about proposed budget measures and taxation tempered the favourable effect of lower interest rates.
The market was waiting for Chinese retail sales and industrial output data due around 0530 GMT. The New Zealand dollar was holding just above a one-month low at $0.7278 in the face of a broadly stronger US dollar and dovish expectations for the Reserve Bank of New Zealand's (RBNZ) monetary statement on Thursday. The central bank is expected to reinforce its neutral stance with a commentary and economic forecasts that point to rates staying on hold for an extended period. "We do not believe the RBNZ will wish to fuel rate cut expectations, however we do think it will significantly flatten its published 90-day bank bill track," said BNZ senior strategist Kymberly Martin in a note.