WELLINGTON/SYDNEY: The Australian and New Zealand dollars slipped to multi-month lows on Monday after a set of disappointing Chinese data encouraged investors to further unwind carry trades.
The Australian dollar fell as far as $0.8999, its weakest since late March to be last at $0.9012. It has tumbled four cents in 10 days, mostly due to a rising US dollar as the market seemed to be repricing the risk the Fed could take a more hawkish tone at its policy meeting later this week.
"The local unit is likely to remain under pressure ahead of the key (Fed) verdict with strong support at $0.8980 likely to be tested in the short term," Macquarie said in a note. A break could see a retracement all the way to $0.8660, the 2014 trough.
The move lower came after data out on Saturday showed China's factory output grew at the weakest pace in nearly six years in August.
The Aussie is sensitive to news out of China as the currency is considered a liquid proxy for China.
The weak figure only added to worries about a 40-percent slide this year in prices of iron ore prices, Australia's top export earner.
Not helping is a spike in volatility, which has pushed investors to unwind popular carry trades against the yen and euro. The New Zealand dollar was in no better shape, having plumbed a seven-month low of$0.8129 to be last at $0.8141. It has shed 7 cents in two months and also looked vulnerable.
"Weakness in Chinese data, uncertainty over whether a trough in dairy prices has been reached, the Reserve Bank of New Zealand (RBNZ) on hold, a declining Australian dollar, and prospective subtle shifts in the stance of the Fed should keep the NZD under pressure," ANZ analysts said in a note.
Near term support is seen at $0.8120 and then $0.8100, with resistance starting at $0.8175.
The most significant local data this week will come out of Fonterra's two-weekly dairy auction on Wednesday, along with second quarter current account later that day and gross domestic product on Thursday.
Expectations are for the annual current deficit to hold around a modest 2.5 percent of GDP, while growth is seen to have slowed resulting in the annual rate peaking at 3.8 percent. Data showing New Zealand's service sector activity softening fractionally passed by without impact.
An added risk for the kiwi will be politically-inspired volatility ahead of the general election on Saturday. Polls give the ruling centre-right National Party a substantial lead, but it will still depend on small parties to govern.
Soft data from China at the weekend saw the Aussie hit harder than the kiwi to a three-week low of NZ$1.1018 and was last at NZ$1.1071. New Zealand government bonds were mixed with a slight offered tone in mid-dated paper, but flat at the long end.
Australian government bond futures fell to near three-month lows.
The three-year bond contract eased 1.5 ticks to 97.145. The 10-year contract shed half a tick to 96.350, having touched 96.315, the lowest since June.
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