The New Zealand dollar fell again on Tuesday as political uncertainty weighed on investor sentiment, while its Australian counterpart struggled below a key chart level as markets were rattled by fears of war on the Korean peninsula. The New Zealand dollar hit a 1-1/2-week low of $0.7237, clocking its second straight day of losses after no single party won enough seats to form a government at Saturday's general election.
In response, the kiwi fell 1 percent on Monday for its biggest one-day percentage loss since May 11. It piled on another 0.3 percent on Tuesday and was already poised for its worst weekly performance since late April. Across the Tasman Sea, the Australian dollar held at $0.7941, after breaking below major support of 80 US cents last week when it touched a near one-month trough.
Against the Japanese yen, the Aussie steadied near 1-1/2-week lows after three consecutive sessions of losses. Bonds rallied as tensions between the United States and North Korea took another sour turn. North Korea amped the level of anxiety in global markets by saying US President Donald Trump had declared war on the country and that Pyongyang reserved the right to take countermeasures.
New Zealand government bonds rose, sending yields about 5 basis points lower at the long end of the curve. Australian government bond futures ticked higher, with the three-year bond contract up 2 ticks at 97.830. The 10-year contract climbed 2.5 ticks to 97.195. The kiwi is the world's 11th most-traded currency, sought after by investors for its attractive yields and the nation's strong credit ratings thanks to its stable political and economic institutions.