Australia, NZ dollars fall as investors wager on Fed hike

[SYDNEY] The Australian and New Zealand dollars retreated on Tuesday as the market priced in a greater chance of a US Federal Reserve rate hike in December, though firmer commodity prices offered some support.

The Australian dollar fell 0.2 per cent to US$0.7589, unwinding a rally on Monday that had been fuelled by rising oil and iron ore prices. The Aussie has been stuck in a broad range of US$0.7535 and US$0.7693 over the last three weeks.

The greenback rose against most currencies after Democrat Hillary Clinton widened her lead in US Presidential election polls over Republican Donald Trump, whose campaign is reeling from the impact of sexually aggressive comments he made about women in a video broadcast on Friday.

Investors tend to see a Mrs Clinton victory as a reaffirmation of the status quo, while a Mr Trump victory would entail such policy uncertainty that the Fed might balk at tightening.

"The USD appears to be benefiting from the perception that a Clinton win will open the way for a December hike," said Rodrigo Catril, currency strategist at National Australia Bank.

According to the CME Fed watch, the market is pricing in a 70 per cent chance of a rate hike in December compared with about 65 per cent last week.

The Aussie, and its Canadian cousin, had shown some resilience after oil prices hit a one-year high on Monday as Russia agreed to join other producing nations in curbing crude output.

The Aussie is sensitive to commodity prices as Australia is a major exporter of natural resources.

Elsewhere, the Aussie held near three-year highs against the British pound at A$1.5509. It stood near a 2-month peak against its New Zealand counterpart and at one-month highs against the Japanese Yen.

The New Zealand dollar edged down on Tuesday, slipping to US$0.7134, from as high as US$0.7202 the previous day.

Still, analysts argued the strength of the domestic economy would limit the losses.

"We find it difficult to ignore local positives, including the prospect of 3.5-4 per cent GDP growth, still high relative interest rates...these factors will lend the NZD some support,"said David Croy, senior rates strategist at ANZ.

Data out on Tuesday showed spending via electronic cards had jumped 1.9 per cent in September on the previous month, extending a run of upbeat indicators.

New Zealand government bonds eased, sending yields 3 basis points higher at the long end of the curve.

Australian government bond futures were weak too, with the three-year bond contract down 5 ticks at 98.33. The 10-year contract fell 7 ticks to 97.775.

REUTERS