Australia, NZ dollars suffer sharp reversal as global mood swings

SYDNEY: The Australian and New Zealand dollars were in retreat on Thursday as a sharp reversal in global risk sentiment wrongfooted speculators and triggered a wave of stop-loss sales.

The sudden change of mood saw the Aussie down 0.4% at $0.7628, snapping major chart support at $0.7640 and hitting its lowest since late December.

That was a marked turnaround from early Wednesday when it had been testing resistance around $0.7765, and risked a pullback toward $0.7550.

The kiwi dollar slid to $0.7139, having shed 1.1% overnight from a top of $0.7245. That took it uncomfortably close to the January low at $0.7097, a breach of which would risk a return to $0.7000.

Concerns about delays in the global roll-out of coronavirus vaccines has clouded the outlook for commodity demand and prices, as had a tightening in Chinese money markets this week.

China's central bank had surprised by draining money from the banking system and nudging market interest rates higher, a possible threat to the country's demand for resources.

Joseph Capurso, a strategist at CBA noted there were also reports that Beijing wanted Chinese steelmakers to reduce production and lessen their reliance on Australian iron ore.

The Asian giant currently takes over 80% of Australia's iron ore exports, which are also its single biggest export earner.

Figures out Thursday showed prices for iron ore exports jumped by almost 12% over the December quarter, delivering a big boost to mining profits and government tax receipts.

The economic unease did provide a boost to bonds, with Australian 10-year yields easing to 1.05% and away from a recent peak at 1.118%.

New Zealand bonds have not fared so well amid speculation the Reserve Bank of New Zealand (RBNZ) was done easing given strength in domestic demand and house prices.

Yields on 10-year paper edged up to 1.110%, having touched a nine-month high of 1.143% last week.