Australia, New Zealand dollars slip on yen, stable elsewhere

[SYDNEY] The Australian dollar took a sudden turn lower against the yen on Tuesday as speculators pushed the Japanese currency higher against the U.S. dollar and euro, though the Aussie held steady elsewhere.

The Australian dollar fell 0.8 per cent to 77.12 yen in afternoon trading. It hit an intra-day trough of 77.04 yen, its lowest since Aug 4. The New Zealand dollar fell to a one-week low of 72.47 yen.

The move was triggered by selling of the US currency, which fell below 100.78 yen to its lowest since July 11. Dealers suspected stop-loss sales were tripped on the break of 100.90 support and had an exaggerated impact in summer-thinned markets.

The Aussie fared better against the US dollar, rising 0.13 per cent thanks to firmer commodity prices.

Locally, minutes of the Reserve Bank of Australia's (RBA) August policy meeting reiterated that a quarter point cut in official rates earlier in the month was necessary to boost economic growth.

The RBA left its forecasts for inflation, unemployment and growth broadly unchanged from May but appeared to have become more uncertain about momentum in the labour market. "We expect to see continued weak inflation and wages outcomes providing more room for further monetary stimulus," said Michael Workman, senior economist at Commonwealth Bank. "The dangerous downward trends in wages and inflation are very likely to support another rate cut in November."

The futures market is pricing in an even chance of another cut by the end of the year.

The New Zealand dollar was largely unchanged at US$0.7211. "It's supported by still-substantial yield differentials and solid local data," said ANZ Senior Economist Sharon Zollner.

Looking ahead, she said a Global Dairy Trade auction later in the day was likely to be supportive of the kiwi, though domestic jobs data due on Wednesday might be more of a "mixed bag."

New Zealand government bonds fell slightly, sending yields 1 basis point higher across the curve.

Australian government bond futures eased, with the three-year bond contract down 1 tick at 98.62. The 10-year contract fell 1 tick to 98.105.

REUTERS