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Australia, NZ dollars near 7-month lows, little changed on year

Friday, December 23, 2016 - 10:14

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The Australian and New Zealand dollars stayed near seven-month lows on Friday in thin trading as investors wound down ahead of the Christmas holidays.

[SYDNEY] The Australian and New Zealand dollars stayed near seven-month lows on Friday in thin trading as investors wound down ahead of the Christmas holidays.

The Australian dollar was up 0.14 per cent at US$0.7226, after hitting a trough of US$0.7198, a level not seen since May 31.

The New Zealand dollar stood at US$0.6908, edging up for a second day after six sessions of heavy losses.

Both of the currencies have fallen in six out of their last ten sessions and are set for their second straight weekly loss.

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They have been particularly hard hit since early November after Donald Trump scored an upset win in the US Presidential elections, sending Treasury yields and the US dollar soaring on expectations US growth and interest rates will step up a notch next year.

The Aussie has erased all of the gains made this year after climbing as much as 6.5 per cent before the Nov 8 election. On top of this, data this month showing the economy shrank for the first time since 2011 - raising the spectre of a possible recession - has also weighed on the currency.

The Aussie is set to finish 2016 down 0.8 per cent - its fourth straight year of losses.

Traders say the near-term outlook for the Aussie appears gloomy, with the next stop seen at US$0.7150. Key resistance lies at 73 US cents, a breach of which could spur a small rally.

It has, however, fared better against the yen, thanks to carry trade where investors borrow in safe-haven low-yielding currencies for high-yielding assets such as the Aussie and the Kiwi.

The Aussie was mostly flat against the yen on Friday but has already risen 9 per cent in December alone.

The euro was slightly higher, clocking its second straight day of gains on the Aussie. It is set to end the week up 1.2 per cent after three weeks of losses.

In comparison, the Kiwi is still seen ending the year slightly higher.

It was in part helped by a string of solid economic data. The price of dairy - New Zealand's top goods export - has been climbing since mid-2016. Data this week showed the country's gross domestic product rose 1.1 per cent, putting it among the rich world's fastest growing nations.

New Zealand government bonds eased, sending yields about 4 basis points higher on the short-end of the curve and 2 basis points higher on the long-end.

Australian government bond futures slipped too, with the three-year bond contract down 3 ticks at 97.87. The 10-year contract was off 4.5 ticks to 97.0850.

REUTERS

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