SYDNEY: The Australian and New Zealand dollars were vulnerable on Monday just above some critical support levels as China disappointed with modest rate cuts, while their recent bearish trend showed no signs of reversing yet.
The Aussie was pinned at $0.6412, having shed 1.4% last week to a nine-month low of $0.6365.
That remains the near-term support level but a break there would take it closer to the 2022 low of $0.6170, last seen in October.
The kiwi was reeling at $0.5922, after also fallen 1% to a nine-month trough of $0.5903.
Support lies around $0.5840, while its 2022 nadir is still somewhat distant at $0.5512.
On Monday, China’s central bank trimmed its one-year lending rate by 10 basis points and left its five-year rate unmoved, a surprise to analysts who had expected cuts of 15 basis points to both.
That came despite China’s securities regulator unveiling a package of measures on Friday to boost investor confidence in the stock market, which fuelled hopes of more stimulus from Beijing.
Australia, NZ dollars caught in crossfire from China woes, US yields
The two currencies - proxies for China risk given their exposure to the local consumer market - initially dipped on the news but soon recovered some of their posture, with traders looking ahead to the US Federal Reserve’s Jackson Hole symposium for a guide on where rates might settle.
“With the AUD/USD down 4.75% in August and little in the way of data on the Australian economic calendar this week, hopes of an Aussie rebound this week depend on offshore events, which have already started on a disappointing note,” said Tony Sycamore, market analyst at IG.
“If/when the 0.6350 support level goes, there isn’t much in the way of downside support until 0.6200/0.6170, before 0.6000.”
The benchmark Australian ten-year government bond yield was last at 4.256%, having surged 12 basis points the week before in tandem with a global sell-off in bonds.
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