The Australian and New Zealand dollars were slightly lower in tentative early trade on Tuesday, after riskier assets were hit hard overnight on renewed selling in oil markets. Crude oil futures fell 6 percent after Iraq announced record-high oil production, feeding into a heavily oversupplied market, and senior officials with the Organisation of the Petroleum Exporting Countries (Opec) signalled they were unlikely to reduce crude production unless non-Opec countries did likewise.
Trading was fairly quiet partly reflecting a holiday in Australia though Wall Street, the dollar and many of the perceived riskier assets retreated amid the renewed selling in oil markets. The Australian dollar was fetching $0.6937, down around 0.3 percent from late New York trading while the New Zealand dollar was at 0.6435, down around 0.3 percent.
"There is very little data and holiday influenced markets have left us becalmed ahead of Australian CPI tomorrow and the RBNZ on Thursday," Stuart Ive, Wellington-based Foreign Exchange and Derivatives Senior Client Advisor for OM Financial Ltd Ive said that if the Australian inflation number is similar to last week's very soft data in New Zealand, "then tomorrow we could see a lot of pressure on the Australian dollar as it will lead to calls for the central bank to act as their inflation targets diminish."
The collapse in oil prices and slackening global growth have stoked deflationary pressures across a number of emerging and developed economies and have raised the odds of more monetary easings. In New Zealand, the central bank is widely expected to keep rates on hold on Thursday but economists are expecting the tone of the statement to point to more rate cuts. New Zealand government bonds eased, sending yields 1.5 basis points higher across the curve.