The Australian and New Zealand dollars had their backs to the wall on Wednesday as the mounting economic toll of the coronavirus drove funds to safe havens such as the Japanese yen and shoved local bond yields toward all-time lows.
The Aussie was hard pressed at $0.6600, just a whisker above the recent 11-year trough of $0.6585 and down 1.4% for the month so far.
It was under even greater pressure against the yen where it dropped to 72.65 yen, having ended last week up around 74.00. It was now threatening chart support at 72.38 and a break would take it to levels not seen since October.
The kiwi dollar was pinned near a four-month low at $0.6316 and close to breaching support at $0.6303.
Investors have been spooked by the spread of the virus and the risks that poses to an open economy like Australia that relies heavily on international trade and tourism.
"Reduced trade and people flows, workplace absenteeism, supply chain disruption, and the impact on consumer and business sentiment are all going to weigh on growth," said analysts at ANZ in a note.
"We revised our Australian outlook lower earlier this month, but the risks are firmly tilted to the downside at present."
Data out on Wednesday showed the local economy was already struggling even before the virus and widespread bushfires wreaked havoc on the tourism sector.
The value of construction work done fell by 3% in the December quarter, when analysts had looked for a drop of only 1%, with home building and engineering both in the dumps. Markets still think it highly unlikely the Reserve Bank of Australia (RBA) would act as soon as its next policy meeting on March 3, but futures now imply around a 38% chance of a quarter-point rate cut in April. The probability of a move by May has climbed to 66%, while June is put at 82%.
Yields on three-year bonds have dropped 10 basis points in the past five sessions to reach 0.627%, and were fast approaching the record low at 0.553%.
Three-year bond futures were up 1.5 ticks on Wednesday at 99.380. The 10-year contract was steady at 99.0750, implying a yield of 0.925%.
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