SYDNEY: The Australian and New Zealand dollars hit five-month lows on Tuesday, weighed down by weaker appetite for risk and a slide in the Chinese yuan, while China’s better than expected economic growth figures failed to provide much of a lift.
The Aussie fell 0.4% to $0.6417, the lowest since November.
It eased 0.3% overnight to breach a key support level of $0.6443, the low from February, as an initial bounce lost steam with US stocks sliding.
Support is now at November’s low of $0.6340.
The kiwi slipped 0.4% to $0.5880, having lost 0.5% overnight to as low as $0.59. It has support at the November low of $0.5863.
Risk sentiment, which initially recovered after Iran’s weekend attack on Israel, took a turn for the worse as US stocks tumbled overnight.
Fears that the attack will trigger a wider conflict in the Middle East have traders on edge, as Israel’s military has said it will respond to the attack.
Strong US retail sales data overnight also added to the case that interest rates would likely stay high for longer, driving a jump in US yields.
In addition, China’s central bank on Tuesday set the guidance for the yuan on the weaker side of the key 7.1 per dollar, the first time in over three weeks.
The yuan hit five-month lows, bringing its liquid proxies with it, and the two antipodeans reacted little to data showing that China’s economy expanded at a faster than expected pace in the first quarter.
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Analysts at ANZ on Tuesday revised up their China GDP forecast to 4.9% this year thanks to the better than expected first-quarter result.
“The year 2024 is significant for policymakers: the People’s Republic of China will celebrate its 75th founding anniversary in October… Against this backdrop, authorities will likely increase policy support in Q2 and Q32024, aiming to cement 5% GDP growth,” said Raymond Yeung, chief China economist at ANZ.
Australian bonds tracked their US counterparts lower.
Three-year bond futures fell 4 ticks to 96.13, nearing a major support level of 96.11.
Ten-year bonds also fell 5 bps to 95.67.
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