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Australia, NZ dollars swept lower on broad USD strength

[SYDNEY] (Reuters) - The Australian dollar kicked off the new year on a lower note on Monday in light post-holiday trade, but was hovering near six-month highs against a soggy pound.

The Australian dollar dropped to US$0.7233 against a broadly firmer US dollar, from US$0.7285 on Thursday, pulling closer to a trough under 71 cents touched mid-December.

Traders said the move was exaggerated by a lack of liquidity with many market players still out after the holidays.

The Aussie shed nearly 11 per cent in 2015 in a third year of losses on falling commodity prices, rate cuts by the Reserve Bank of Australia (RBA) and prospects of slower growth in China.

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Yet, the Aussie has proved relatively resilient to a sharp fall in the prices of iron ore, the nation's top export earner.

A source of major support for the Aussie is a global yield hunt with local 2-year government bonds fetching more than 2 per cent. This compares with near zero rates in Japan and even negative returns in Germany and France.

Sterling held at A$2.0326, having dropped 21 cents since June. A break under A$2.0161-68, the 61.8 per cent retracement of the March-August climb, could see a move all the way to A$1.8809.

Across the Tasman sea, the New Zealand dollar fell nearly 1 per cent in the session to US$0.6765 in light trade with financial markets there shut for a public holiday. They will re-open on Tuesday.

The kiwi lost more than 10 per cent in 2015, but dairy prices showed signs of bottoming out last year and analysts reckon this could give it a leg up over the Aussie in 2016.

Australian government bond futures were mixed, with the three-year bond contract down 1 tick at 97.950. The 10-year contract added half a tick to 97.1200, while the 20-year contract was up one tick to 96.6200.


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