Australian, New Zealand dollars slip

Updated 26 Oct, 2019

The Australian and New Zealand dollars nursed losses on Friday as a fresh bout of Brexit uncertainty undermined risk sentiment and bulls bailed on long positions after a failure to breach key chart barriers. The Aussie slipped to $0.6819, leaving it down 0.6% on the week, having backed away from tough resistance at the September top of $0.6895. Support now comes in at $0.6810 and $0.6774.

The kiwi dollar eased to $0.6376, having also failed to clear its September high of $0.6450. Near-term support lies at $0.6354.

The dovish outlook is helping keep bond yields not far from record lows. Three-year bond yields stand at 0.70%, compared to 1.83% at the start of this year.

The three-year bond future added 2.5 ticks on Friday to stand at 99.305, while the 10-year contract gained 3 ticks to 98.9450.

New Zealand government bonds also rallied with yields falling almost 6 basis points at the long end of the curve.

Investors are looking ahead to the US Federal Reserve's policy meeting on Oct. 30 when it is considered almost certain to cut rates a quarter point, and may leave the door open to further easing if needed.

Such a move would pile pressure on the Reserve Bank of New Zealand (RBNZ) to ease at its meeting on Nov. 13 or risk an unwelcome increase in the kiwi.

Futures imply around an 85% chance of a quarter-point cut to 0.75%, with a further move to 0.5% seen likely next year.

The Reserve Bank of Australia (RBA) has already got to 0.75% following three cuts since May and is thus considered likely to sit out a move at its meeting on Nov. 5.

Copyright Reuters, 2019

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