The Australian and New Zealand dollars stayed under pressure on Wednesday as a wave of risk-aversion swept through global markets and led some investors to wager interest rates would have to be cut in Australia to avoid recession. In fact, so strong was demand for safe-haven government bonds that yields were driven to the lowest since mid-2009.
Yields on the Australian 10-year paper sank below the 4.75 percent cash rate to a low of 4.58 percent, an inversion often associated with recession fears. As a result, the Aussie skidded as much as one cent to a two-week low of $1.0679, having already shed more than a cent overnight. But bids emerged around $1.0680, helping the Aussie climb back to $1.0741 in late trade. The Aussie also took a brief hit from soft June retail sales data, which showed a dip of 0.1 pct against a forecast of a 0.3 pct rise.
The Aussie was also sharply lower on almost every other currency. It reached four-month lows versus the yen at 82.39, while the euro touched a one-week high at A$1.3263. Against the New Zealand dollar, the Aussie plumbed a one-year low at NZ$1.2394 before recovering some ground to last trade at NZ$1.2457.
The kiwi slipped a cent-and-a-half to $0.8627, having been as low as $0.8596. The kiwi also felt the pressure from dairy prices, which fell for the third successive sale at Fonterra's latest online auction. Prices for New Zealand's top export earner have lost more than 6 percent this year.