Australia, NZ dollars wobble near lows as falling commodity prices add to woes

SYDNEY: The Australian and New Zealand dollars languished near recent lows on Tuesday as falling commodity prices added to their woes ranging from China’s stimulus disappointment to a broader shift towards the US dollar following the US election.

Overnight, commodity prices took a hammering with iron ore slumping about 2% and copper falling to seven-week lows, another negative for the two Antipodean currencies.

Data from China - the biggest trading partner of Australia and New Zealand - showed new bank lending fell more than expected in October.

All of that means the Aussie was left struggling at $0.6570, having edged 0.1% lower overnight.

It is hovering just a touch above a three-month low of $0.6510 hit on the day of Donald Trump winning the US election, unleashing a bout of buying in the greenback.

The kiwi dollar was reeling at $0.5965, after finishing Monday 0.1% lower. It is not far above the Nov. 6 low of $0.5912, which is the near-term support.

“Local FX markets got off to a quiet start to the week yesterday, and today is shaping up to be much the same given the lack of data, and with the focus still on the US and Trump’s election win,” said analysts at ANZ.

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“But even that has stopped causing significant volatility and instead markets are in a state of reserved optimism, which has kept the USD elevated, but not propelled it higher.”

Trump’s win has emboldened dollar bulls on expectations the President-elect’s economic policies, such as proposed tax cuts and tariffs on overseas imports, will stoke inflation and temper the extent of the Federal Reserve’s future rate cuts.

Down Under, data showed Australian consumer and business mood lightened up as fears of rate rises dissipated with inflation now back in the target band, even though prospects of a near-term interest rate cut remain slim.

Swaps imply scant chances of a move from the Reserve Bank of Australia until April next year, which is only half priced for a quarter-point easing.

The first rate cut is not fully priced in until July.

The market implies only a modest fall to 3.89% by the end of 2025.

That compared with 3.8% for the US Federal Reserve as investors revised up the terminal rate after Trump’s victory.

In New Zealand, the risk is the Reserve Bank of New Zealand might step up its policy easing to an outsized 75 basis points this month given a large meeting gap. A 50 bp move has been fully priced in.