The Australian and New Zealand dollars traded in a slim range on Tuesday, drifting off the session lows after Chinese stocks showed signs of steadying from a steep fall in the previous session. While China's benchmark equity index is hardly a reliable indicator of the health of the Chinese economy, the Aussie dollar still has a particularly strong correlation with it. China is a major market for Australia's key iron ore and coal exports.
The Aussie was last at $0.9943, having recovered from a session low of $0.9898. Immediate support for the Aussie seen at around $0.9879, the January 17 low, and resistance at the January 14 high of $0.9994. The currency held within Monday's range, suggesting a lack of direction.
The initial decline was triggered by selling from Japanese exporters, which drove it and the euro down, according to David Scutt, a trader at Arab Bank Australia. The Aussie had taken a hit in the last couple of days on news of heavy floods in the coal-exporting state of Queensland, a weaker euro and China's move to further tighten its policy. Slower Chinese growth could crimp demand for commodities.
Since hitting a 28-year high around $1.0257 on December 31, the Aussie has struggled to extend gains. "We are not supremely confident the Aussie should be back to parity," said TD Securities head of Asia Pacific research, Annette Beacher. The Canadian bank sees the Aussie oscillating between $0.9500 and $1.0000 for the next couple of months.
In New Zealand, the kiwi edged to a session high in late local trade, touching $0.7736 after spending much of the day anchored around $0.7710/20. It hit a two-week high of $0.7749 overnight. The kiwi continued to hold its ground against the Aussie at NZ$1.2854, the pair sit just above a seven-week low at NZ$1.2846.
The Aussie and kiwi dollars held their ground against the euro. The single currency hovering around A$1.3317, down from a six-week high of A$1.3517 hit on Friday. It buys NZ$1.7215, after having shed more than two cents on Monday. Support is put at $0.7670, with resistance initially at $0.7749, the daily high of January 17 and then $0.7767.