Australia, NZ dollars weaker but within range amid commodities selloff

SYDNEY: The Australian and New Zealand dollars were lower on Friday, taking their lead from iron ore and mining stocks that have been hit after Beijing vowed to stabilise commodities prices.

The commodity-price sensitive Aussie was trading 0.23% lower at $0.7754, having started the week at $0.7787 but far from its monthly low of $0.753. It remains short of its May high of $0.7891.

The New Zealand dollar was also a quarter of a percent lower at $0.7183, trading at or below its previous day close of $0.7202 for most of the session.

"The AUD remains stuck in a tight range, capped above $0.78 by China trade concerns but supported by a softer US$ and still strong commodity prices below $0.77," Westpac strategists said.

"Steel prices in China have dropped circa 14% over the last week suggesting that official intervention has had a material impact and that iron ore may weaken further.

Thus AUD will likely continue trading weak versus the likes of the euro and GBP."

The Aussie's weakness came even as a survey of Australian retailers showed stronger-than-expected sales in April, led by a jump in food retailing, in yet another sign the country's economy is booming.

Asia's iron ore benchmarks were sold off on Friday for a third day after Beijing sought more oversight of commodity markets to curb exorbitant prices, pulling shares in mining giants Rio Tinto and BHP also lower.

Analysts, however, say unless China takes steps to curb the consumption of industrial commodities, which could hamper its recovery from a pandemic-driven slump, the price impact of recent measures and pronouncements will only be temporary.

Australian 10-year government bond yields were four basis points lower at 1.672%, tracking US Treasuries that fell overnight.

The futures contract for the same maturity was up 4 ticks each at 98.33, implying an unchanged yield, while the three-year bond contract was trading 2 ticks higher at 99.77, implying a yield of 0.23%.

New Zealand government bonds were also higher, leading to yields falling 3-to-4 basis points at the longer end of the curve.