SYDNEY: The Australian and New Zealand dollars lost ground on Friday as a slide in global stock markets undermined risk assets, but gave bonds a reprieve from recent selling.
The Aussie lapsed to $0.7184, having been as high as $0.7275 on Thursday, and was down 0.5% on the week. Support lies at $0.7170 while resistance comes in at $0.7277 and $0.7314.
Yields on Australian 10-year bonds also eased to 1.898%, from a three-month top of 2.01% reached on Wednesday.
The kiwi dollar lagged further behind at $0.6724, in part because the Aussie was up 0.9% for the week on the kiwi at NZ$1.0687 and near a six-month top.
Stock markets seem to have become increasingly spooked that the U.S. Federal Reserve will adopt an even more hawkish outlook at its policy meeting next week given the stubbornness of inflation.
Speculation is also mounting that the Reserve Bank of Australia (RBA) will have to back away from its very dovish stance on rates given that unemployment had dived as low as 4.2% a whole year earlier than forecast.
Consumer price data due next week could well force a hawkish turn if it shows core inflation rising as far as some fear. Both National Australia Bank and Commonwealth Bank of Australia predict trimmed mean inflation to hit 2.5% in the December quarter, the highest since 2009 and dead in the middle of the RBA’s 2%-3% target band.