SYDNEY/WELLINGTON: The Australian and New Zealand dollars were in retreat on Thursday after markets brought forward expectations of interest rate hike in the United States, sending bonds and stocks skidding.
The Aussie slipped to $0.9007, having fallen 1 percent overnight after Federal Reserve Chair Janet Yellen said the central bank might end its bond-buying program this fall, and could start to raise interest rates around six months later.
The US dollar jumped across the board with the Aussie dollar back to where it started the week. It had gained more than a full cent to $0.9138 on Wednesday and scaled a three-month peak of 70 on a trade-weighted basis.
It was now targeting key chart support at $0.8990 with dealers citing stops below $0.8980.
"A clear theme now is pressure on US rates which will keep the US dollar well bid," said a trader at a European bank in Singapore, seeing the Aussie spending more time below 90 cents than above in the near term. Resistance was found around $0.9050.
The New Zealand dollar was also about 1 percent lower at $0.8525, as investors looked more closely at the prospect of US rate rises. The currency, which hit an 11-month high of $0.8641 on Tuesday, extended losses after data showed the New Zealand economy grew at a solid 0.9 percent in the final quarter, exactly in line with expectations.
"The kiwi had been grinding back after the Fed news, and that rattled things up so when the GDP numbers offered no surprises the market continued its readjustment," said ASB Bank economist Chris Tennent-Brown.
He said US dollar strength could be expected to continue, with the prospect of an end to tapering and a likelihood of US rate rises, which in broad terms would see the kiwi soften. The kiwi was seen with near-term support around $0.8510, with resistance emerging on the run towards $0.8600.
New Zealand's fourth quarter gross domestic product report showed growth driven by business investment, food manufacturing, exports, and consumer spending.
Nominal, or current price, GDP ran at a blistering hot 9.3 percent for the year, almost matching China's performance as the country benefited from a huge boom in its terms of trade.
The strong result supported the decision by the Reserve Bank of New Zealand to lift interest rates last week.
"The outcome reinforces that the RBNZ will lift the OCR (official cash rate) by 25 basis points at the next meeting in April," ASB economists said in a note.
The kiwi was also looking soft against most majors on the cross rates, notably the yen, euro and sterling. The trade-weighted New Zealand dollar was 0.4 percent lower. New Zealand government bonds were softer, pushing yields up to 4 basis points higher.
The fall in US bond prices pressured Australian government bond futures.
The three-year bond contract slipped 5 ticks to 96.960, while the 10-year contract lost 7.5 ticks to 95.850, having touched a two-month trough of 95.795.
Comments
Comments are closed for this article.