Australia, NZ dollars fall as US-Iran peace talks fail
- The Aussie hit an intraday low of $0.6979 before recouping some losses to be last down 0.5% at $0.7035
SYDNEY: The Australian and New Zealand dollars fell on Monday after peace talks to resolve the war in the Middle East collapsed, while the US’ planned blockade of Iranian ports sent oil prices and bond yields higher.
The Aussie hit an intraday low of $0.6979 before recouping some losses to be last down 0.5% at $0.7035.
It rallied 2.7% last week, the biggest weekly gain in almost three months, but resistance is heavy at 71 cents.
The kiwi dollar was down to $0.5790 but trimmed most of the losses to be last off 0.3% at $0.5823.
Having gained 2.8% last week, support is solid at 58 cents, after its central bank turned hawkish amid a spike in fuel costs.
Joseph Capurso, head of international economics at the Commonwealth Bank of Australia, said the Australian dollar was ripe for a downward correction as hopes of a quick end to the Iran war could be misplaced.
“We are not surprised an agreement was not reached quickly … We expect talks to resume again this week,” he said.
“The two-week ceasefire may be extended to accommodate further talks.”
Over the weekend, talks between the US and Iran in Islamabad ended in a stalemate and Washington announced a blockade of Iranian ports, a move seemingly aimed at stopping Iran from exporting oil.
Brent crude prices jumped 7% to $101.91 a barrel.
Bonds took a kicking on inflation fears.
Three-year Australian government bond yields rose 5 basis points to 4.713%, while the 10-year yield jumped 6 bps to 5.208%. Reserve Bank of Australia Deputy Governor Andrew Hauser will speak in New York late on Monday.
Markets are leaning towards another rate hike from the RBA in May to 4.35% after two moves this year.
Australia will publish its monthly jobs data for March on Thursday where any labour market disruptions from the ongoing Middle East conflict will be closely monitored.
Across the Tasman Sea, markets imply around a 38% chance that the Reserve Bank of New Zealand will lift its 2.25% cash rate by 25 basis points in May, while a hike by July has been more than fully priced in.
The rate is now seen reaching 3.0% by the end of the year.
























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