Aussie & NZ$ dumped as stocks, commodities slide

SYDNEY/WELLINGTON: The Australian and New Zealand dollars slumped to multi-week lows on Monday as investors rushed to safe-haven assets like the Swiss franc and gold, ignoring efforts by global policymakers to stabilise markets and restore confidence.

The Aussie slumped to a four-month trough of $1.0314, from $1.0458 in New York on Friday, having cracked major support at $1.0375. The currency, down 1.2 percent on the day, gave in to heavy losses in Asian stocks and commodities.

Indeed, share markets across Asia sank between 2 and 5 percent, while metal prices and oil also fell sharply.

Fears of recession in the world's top economy, a downgrade of the US credit rating and Europe's woes combined to pummel financial markets in one of the worst routs since the collapse of Lehman Brothers in 2008. Gold roared to record highs.

"The Chinese stock market was particularly weak... People are still a bit unsure about what the downgrade means and are waiting for US and Europe," said Joseph Capurso, strategist at Commonwealth Bank of Australia.

"We'll see more downside for the Aussie... Perhaps another cent lower this week."

It has lost more than 6 percent since it scaled a 29-year peak of $1.1081 on July 27.

Next key floor for the Aussie was seen at $1.0288 with technicals pointing to a move towards $1.0200.

The Australian dollar was also at multi-month lows against a range of currencies. It hit a 4-fourth month trough of 80.35 yen and a two-year low of 78.03 francs.

The euro leapt 1.7 percent higher to a three-month peak of A$1.3882 after the European Central Bank said it would "actively implement" its bond-buying programmes to ease debt tensions in euro zone.

The Aussie, however, outperformed its neighbour at NZ$1.2455, edging up from a one-year low around NZ$1.2331 plumbed Friday. Across the Tasman Sea, the kiwi fell to a near one-month low of $0.8262, from $0.8430 in New York on Friday, taking losses for the past week to around five cents as markets slashed rate hike bets. It was last at $0.8290, with support seen at $0.8205 and resistance around $0.8435.

"A rate hike is off the table until global financial risks recede," said Khoon Goh, ANZ-National head of market economics and strategy. "We expect the data flow to remain robust and out of sync, but for such differentiation to play second fiddle to global fears."

The New Zealand dollar had risen to a 30-year peak of $0.8842 last week on expectations the Reserve Bank of New Zealand would need to hike rates to cool an expanding economy.

However, the latest bout of market turmoil has seen expectations scaled back at its next meeting on Sept. 15, with pricing now implying only a 28 percent chance of a 25 basis point hike. Last week, markets had priced in a 60 percent chance of a 50 basis point hike.

Pricing over the next 12 months has also slumped to only 43 bps from 105 bps last week.

The kiwi also lost more ground to the Japanese yen, with the kiwi sliding to a near one-month low of 64.65 yen.

New Zealand government debt prices tracked US Treasury futures higher, with yields slipping as much as 7 basis points across the curve.

Australian bond futures eased, with the 3-yr contract off 0.05 points to 96.270, and the 10-year 0.055 points lower at 95.480.

Copyright Reuters, 2011