SYDNEY/WELLINGTON: The Australian dollar lurched towards a six-year trough on Thursday, continuing to falter as sliding iron ore prices bolstered expectations for a cut in interest rates next week.
The Aussie reached a session low of $0.7575, edging ever closer to the trough of $0.7561 set in March. It last stood at $0.7595, down 0.1 percent on the day.
Debt markets imply a 77 percent chance of a quarter point easing on April 7, when the Reserve Bank of Australia holds its policy review.
Markets have been upping the risk for a rate cut as prices for iron ore - Australia's single biggest export earner - hit successive lows this week.
There are fears that output cuts at Chinese steel mills would eat into demand for the raw material.
"We view the most significant data point of the week as the decline in iron ore prices. The fall in iron ore to sub $50 a tonne suggests that AUD/USD 'belongs' in the very low 70s or high 60s," analysts at Deutsche Bank wrote in a note to clients.
The New Zealand dollar was also on the defensive at around $0.7452, having reached a two-week low of $0.7392 in choppy offshore trade.
The kiwi has its own commodity troubles with dairy prices suffering a second consecutive sharp slide at Fonterra's latest auction.
The 10.8 percent drop in prices for New Zealand's biggest export earner renewed the threat to Fonterra's forecast payout to suppliers.
Near term support for the kiwi is seen at $0.7390 with resistance at $0.7480.
New Zealand government bonds were firmer, sending yields 4 basis points lower across the curve.
Australian government bond futures tracked U.S. Treasuries higher. The three-year contract climbed 4 ticks to 98.360, while the 10-year contract put on 2.5 ticks to 97.6900.
Financial markets in both Australia and New Zealand will be shut on Friday and Monday for the Easter holiday.
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