SYDNEY: The Australian and New Zealand dollars weakened on Tuesday amid a broad sell off in equity markets driven concerns over inflation, higher oil prices and a possible economic slowdown in China, the biggest export market for the Antipodean economies.
The Aussie was 0.32% lower at $0.7265, as the Reserve Bank of Australia (RBA) kept rates at 0.1% and maintained its bond buying program at its monthly policy meeting, as widely expected.
The falls partly reversed three days of gains that stemmed from higher prices for key exports, coal and liquefied natural gas (LNG).
Australia, NZ dollars groggy after rough week for risk
The Aussie faces resistance around $0.7306, the mid-point of its monthly range, and has support around $0.7262.
"The RBA today stuck to its guns by predicting that rates won't rise until 2024, but our view that inflation will remain higher for longer means it will happen in early-2023," said Marcel Thieliant, Capital Economics senior Australia & New Zealand Economist.
The RBA has consistently reitarated that it would only lift rates until "actual inflation is sustainably" within its 2%-to3% target range, which it does not expect before 2024.
Meanwhile, Australia's trade surplus unexpectedly widened to a record in August as strength in LNG and coal exports more than offset a drop in prices for iron ore exports.
Demand for energy in Asia has risen as shortages of electricity in China led to blackouts and countries compete for LNG and coal shipments ahead of winter.
Oil prices rose to new multi-year highs on Tuesday after OPEC+ confirmed it would stick to its current output policy as demand for petroleum products rebounds.
"We still tend to think that markets are underpricing the risks to growth/ commodity demand from the developing energy and property crises in China," Westpac strategists said in a note.
The New Zealand dollar also reversed a three-day streak of gains, easing 0.27% to $0.6944.
The currency has support at $0.6927 and resistance around $0.6881.
Traders are pricing a quarter point rate hike when the Reserve Bank of New Zealand decides policy on Wednesday.
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