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Australia, NZ dollars seen with large weekly gains vs pound

Friday, May 26, 2017 - 11:19

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[SYDNEY] The Australian and New Zealand dollars nursed losses versus their US counterpart on Friday following a commodities rout, but were on track for hefty weekly gains against a soggy pound.

The Australian dollar dropped to US$0.7431, the weakest this week, having skidded more than a full US cent in one session.

Much of the fall in the Aussie came after crude oil prices tumbled 5 per cent on Thursday, along with a slide in prices of iron ore, Australia's top export earner.

Chart resistance at 75 US cents also undermined the Aussie.

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Market voices on:

"We don't even need a crystal ball for this view as the market had all but convinced itself that selling above US$0.7500 is the trade," said Stephen Innes, a senior trader at OANDA.

Support was found at US$0.7420, then US$0.7329 touched earlier this month.

The New Zealand dollar was also soft at US$0.7013, having shed 0.4 per cent overnight, pulling away from a one-month peak of US$0.7059 touched on Wednesday.

It was still up 1.2 per cent for the week.

The Andipodean currencies fared better against Sterling after UK growth data added to worries the economy was beginning to struggle a year after Britain's shock vote to leave the European Union.

The pound eased to A$1.7340, away from a peak near A$1.7500. It has dropped 0.7 per cent so far this week.

It lost even more ground against the Kiwi dollar to NZ$1.8359, to be down 2.4 per cent for the week. If sustained, it would be the second-largest loss this year.

The Kiwi dollar was a clear outperformer against its Aussie cousin, which slipped to a three-month trough of NZ$1.0571 . The Aussie, last at NZ$1.0589 was on track for a 1.7 per cent drop this week.

"Given the resilience in milk prices and the recent wobbles in iron ore, high NZD trade balance notwithstanding, a break of NZ$1.06 should see significant buy-in which could pressure AUDUSD towards US$0.7400 level," said OANDA's Innes.

New Zealand government bonds rose, sending yields five basis points lower on the long end of the curve.

Australian government bond futures climbed to six-month highs, with the three-year bond contract up 1 tick to 98.290. The 10-year contract added 1 tick to 97.5450, while the 20-year contract was steady at 96.9700.

The spread between Australian and U.S.

2-year government bonds shrank to 29 basis points, the smallest since 2001.

REUTERS

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