Australia, NZ dollars lower as extended COVID-19 lockdowns hit

SYDNEY: The Australian dollar on Monday hit its lowest level against the greenback for 2021 as COVID-19 lockdowns that have restricted the mobility of almost half of the country's population were extended to stop the spread of Delta variant. Risk aversion in the region also pushed the kiwi dollar lower.

The Aussie was 0.17% lower at $0.7385, as simultaneous lockdowns in Australia's two largest cities, Sydney and Melbourne, which account for the bulk of the country's economic output and employment, hurt investor sentiment.

That is the Aussie's lowest level since July 12, 2020, despite commodity prices that remain near multi-year highs, and is far from the currency's February high of $0.80.

The risk-sensitive kiwi was also trading 0.09% lower on Monday at $0.6993, despite the hawkish outlook tabled by the Reserve Bank of New Zealand last week when it announced it would halt its bond buying stimulus programme, pushing the currency as high as $0.7050.

Australia, NZ dollars steady, benefit from weaker US dollar

"The commodity story remains impeccable ... however, the prospect of further USD strength over the northern hemisphere summer, growing global concerns about the delta variant, more aggressive lockdowns across Australia ... plus ongoing trade tension between China and Australia should keep markets wary," Westpac analysts said.

Nearly half of Australia's population of 25 million has been confined to their homes with Sydney, the country's largest city, in a five-week lockdown, and all of Victoria state under stay-at-home rules, after the fast-moving Delta strain triggered the country's worst outbreak for this year.

Australian bonds were higher, pushing the yield on the 10-year Australian government benchmark down four basis points to 1.245%, the lowest since February.

The three-year bond yield also fell one basis point to be at 0.29%.

Across the Tasman sea, New Zealand bonds were slightly higher, pushing short term yields about one basis point lower while yields in the longer-end of the curve fell two and a half basis point.