SYDNEY: The Australian and New Zealand currencies slipped from their recent highs on Tuesday as a relentless rise in the Taiwanese dollar took a breather, with traders shifting their focus to the US monetary policy meeting a day later.
The Aussie eased 0.3% to $0.6448, having hit a five-month peak of $0.6494 overnight along with a meteoric surge in the Taiwanese dollar.
With the fall on Tuesday, it is now back below the 200-day moving average of $0.6458 which is the near-term resistance.
The kiwi also slipped 0.3% to $0.5950, after gaining 0.3% overnight to $0.5963.
It faces resistance at $0.6029, a six-month top from late April.
In the broader market, the dollar plunged almost 10% on the Taiwanese dollar over the past two sessions, fuelling speculation that some Asian countries were prepared to engineer revaluations to win US trade concessions.
On Tuesday, the fall was partially reversed, with the dollar up 3%.
Other emerging market currencies also pulled back, with China’s offshore yuan - which the Australian dollar closely tracks - retreating 0.5% from its six-month highs.
“There are various theories about what is driving the move in Asian FX, including concerns over imminent US tariffs on semiconductors and a new currency accord to reduce the US dollar’s perceived overvaluation,” said Tony Sycamore.
“Where there is smoke, there is usually fire.”
Data from China showed its services sector expanded at the slowest pace in seven months in April, a dismal result.
Australian dollar perched at five-month top, outlook brightens
Local data showed Australia’s household spending fell in March to break a five-month winning stretch, a sign that lower borrowing costs had yet to feed through to consumption.
Markets have fully priced in a quarter-point rate cut from the Reserve Bank of Australia later this month.
The next big event is the policy meeting from the Federal Reserve on Wednesday, which is widely expected to hold rates steady.
Traders will be looking for clues about the timing of next move, now priced in for July.
Across Tasman Sea, New Zealand will publish its quarterly jobs data on Wednesday where expectations are for a further tick up in the unemployment rate to 5.3% from 5.1% in the fourth quarter.
The Reserve Bank of New Zealand will also publish its biannual Financial Stability Report on Wednesday.
The central bank is 70% priced to cut interest rates by another quarter-point later this month, with a total of three more cuts expected this year.
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