The Australian dollar lost some ground on Thursday after a surprisingly sharp fall in business spending last quarter offered speculators an excuse to short the currency, dragging the New Zealand dollar lower. The Australian dollar dropped around a fifth of a US cent to $0.7672, from Wednesday's high of $0.7714 and away from a recent three-month peak of $0.7732. Since November, there has been a wall of resistance around $0.7707-$0.7778.
The setback came after data showed Australian business investment fell 2.1 percent last quarter, when analysts had looked for a drop of 1 percent. The euro managed to regain some ground, albeit very modestly, against the Aussie at A$1.3701. The euro was still within sight of a 3-year trough of A$1.3619 touched on Wednesday, having skidded 5.6 percent so far this year. The New Zealand dollar eased slightly to $0.7184, largely in sympathy with its Aussie cousin.
It had edged as high as $0.7199 earlier when the US dollar took a knock from minutes of the last Federal Reserve meeting which seemed to diminish the chance of a US rate hike as early as March. New Zealand government bonds gained, sending yields 2.5 basis points lower. Australian government bond futures rose, with the three-year bond contract up 3 ticks at 97.960. The 10-year contract added 4 ticks to 97.1750, while the 20-year contract edged up 3.5 ticks to 96.5500. The mixed data failed to inspire confidence as the market was looking for clearer signs of recovery following a shock contraction in economic growth in the third quarter of last year. "I think it keeps alive the prospect for another rate cut, although the Reserve Bank has set a very high hurdle for taking rates lower," said Shane Oliver, chief economist at AMP Capital.
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