Australia dollar stung by RBA's Debelle comments, NZ$ near 1-year highs

[SYDNEY] The Australia dollar fell off a two-year peak on Friday after a top central banker said there was no automatic reason for rates to rise after a recent outbreak of hawkishness by global policymakers.

The Aussie sank nearly one per cent to as low as US$0.7875. It touched a high of US$0.7992 earlier in the week but was rebuffed by stiff chart resistance at 80 US cents.

"Just as the policy rate in Australia did not need to decline to the very low levels seen in other parts of the world, the fact that other central banks increase their policy rates does not automatically mean that the policy rate here needs to increase," Reserve Bank of Australia (RBA) deputy governor Guy Debelle said in a speech in Adelaide.

Canada's central bank increased interest rates to 0.75 per cent this month while the US Federal Reserve has raised rates four times over the past two years. Policymakers in Europe have also shifted to a less dovish stance.

That led some investors to build long positions in the Aussie in anticipation the RBA might echo its global peers.

"RBA deputy governor wasted no time in trying to tame the Aussie's rally during a speech today," said Matt Simpson, senior market analyst at ThinkMarkets.

"Reiterating that a higher currency removes the benefits of growth for Australia, Debelle came out swinging today. For now, it seems his efforts worked."

The Aussie also crashed one per cent on its New Zealand counterpart to NZ$1.063.

Across the Tasman Sea, the New Zealand dollar hit its highest levels since September last year at US$0.7429, with analysts saying there was room for more upside.

However, the kiwi was vulnerable to profit-taking at these levels, they added.

The currency was further underpinned by comments from New Zealand finance minister Steven Joyce who told Bloomberg in an interview that he is not worried about the strength of the local dollar.

"Fundamentally we see reasons for the NZD to be elevated, just not this elevated. The air is getting thin up here. But an extension higher can't be dismissed given USD bearishness, and that looks to be the way it will go short term," ANZ said in a note.

The kiwi fell as far as US$0.7261 this week on softer inflation numbers.

New Zealand government bonds were higher across maturities , with 10-year yields down 3.5 basis points.

Australian government bond futures jumped, with the three-year bond contract rising seven ticks to 98.000. The 10-year contract gained 5.5 ticks to 97.315.

REUTERS