Australia, New Zealand dollars hit by weakness in oil, commodities

SYDNEY: The Australian and New Zealand dollars started the week slightly lower on Monday, tracking losses in oil and copper as COVID-19 infections rise globally, and in spite of bullish sentiment in broader Asian equities markets.

The resource-sensitive Australian dollar recovered to stand around flat at $0.7735 at midday, reversing morning losses that pushed the Aussie to $0.7706.

The New Zealand dollar eased 0.12% to $0.7142 before hitting a four-day low of $0.7117. The kiwi is far from its recent $0.7464 high struck in February, and has support around $0.705. It faces resistance at $0.7200.

Oil prices fell on Monday amid mounting concerns that surging numbers of coronavirus infections in India and other countries will lead to stronger measures and hit economic activity, along with demand for commodities such as crude.

"The sell-off in the commodities markets didn't help the Aussie despite most other markets being stronger today," said Steven Dooley, APAC currency strategist at Western Union Business Solutions.

"There's just a little hangover from the slightly weaker-than-expected data from China last week," he added.

On Friday, Chinese gross domestic product (GDP) grew a record 18.3% in the first quarter from a year earlier, when coronavirus lockdowns paralysed much of the economy, but that was slower than the 19% forecast by economists.

Traders, however, are bullish on both the Australian dollar and its New Zealand counterpart in the longer term.

"We're inclined to go outright long NZD," UBS strategists said. "Some of that is anticipation of a weaker USD backdrop, but the bulk is how much the kiwi has cheapened in Q1. The launch of the Trans-Tasman travel bubble also asymmetrically helps NZD even though it's still tourist low season."

On Monday, the authorities reopened the Australian-New Zealand border, allowing quarantine-free travel between the countries for the first time in over a year.

Australian yields on 10-year bonds were flat at 1.673%. Across the Tasman, yields on New Zealand 10-year bonds were off 2 basis points at 1.633%.