SYDNEY: The Australian and New Zealand dollars edged higher on Monday, taking a breather after recent losses made against the greenback, which has been buoyed by hawkish comments from the Federal Reserve last week.
But both currencies remained near their lowest since late last year after the Federal Reserve last week projected an accelerated timetable for rate increases in the world’s largest economy.
The Australian dollar edged 0.21% higher to $0.7494 but was not far from a six-month low of $0.7482 hit on Friday. A 5% drop in the price of iron ore, Australia’s top export, also kept pressure on the currency.
The New Zealand dollar firmed 0.29% to $0.6954, having hit a seven-month low of $0.6923 on Friday. The kiwi shed 2.7% last week in its worst performance since September.
The bond yield curve in Australia and New Zealand flattened, tracking a similar move in the United States.
Australian 10-year bond yields dropped 9 basis points to 1.46%, tracking equivalent US bond yields lower. Australia’s 3-year bond yield, meanwhile, rose three basis point to 0.462%.
Yields on New Zealand 10-year bonds were ten basis points lower at 1.46%, while 2-year yields moved five basis points higher to 0.46%.
“The Fed’s hawkish surprise last week has been the dominant event for currencies, and ... more tightening from the Fed can be priced in,” said Westpac strategists in a note.
“Until we get a better sense of Fed taper/ tightening intentions, we could see the current move extend towards the $0.7400/25 level.”
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