Australia, NZ dollars at multi-week lows, set for worst week since mid-Dec

[SYDNEY] The Australian and New Zealand dollars languished at multi-week lows on Friday as the greenback strengthened on rising expectations the US Federal Reserve will hike interest rates as early as this month.

The Australian dollar slipped 0.3 per cent to US$0.7555, a level not seen since Jan 31.

The Aussie is down 1.4 per cent this week so far and is set for its worst weekly performance since mid-December. In contrast, the US dollar index is set for its best week since late 2016.

The Aussie traded in a US$0.7605/0.7731 range for all of February, with strong chart support at US$0.7600. Technical analysts say that support was broken in a burst of selling during European trading on Thursday, triggering a series of stop losses.

The Aussie was also pressured by weak commodity prices with aluminium, oil and gold all falling.

"Most commodities had a day to forget and although the USD is stronger across the board, the AUD is the worst G10 performer," said Rodrigo Catril, currency strategist at National Australia Bank.

US dollar bulls were buoyed by comments this week from New York Fed President William Dudley, as well as from San Francisco Fed President John Williams, prompting more investors to increase wagers on a rate hike this month.

Fed Chair Janet Yellen and Vice Chair Stanley Fischer were slated to speak later on Friday, and could reinforce the hawkish message.

Fed funds futures imply a 74 per cent probability of a hike at the Fed's March 14-15 policy meeting.

Elsewhere, the Aussie continued its losing streak. It fell 0.3 per cent on the yen, coming off a two-week high, and hit a three-week low on the euro. It also faltered on its New Zealand counterpart, drifting away from a more than seven-month peak touched on Thursday.

The New Zealand dollar slumped to a near two-month trough of US$0.7043, dropping for a third straight day.

The currency was poised for a weekly loss of 2 per cent, the biggest since mid-December. "The countdown is now on to Yellen's speech, which in all likelihood will determine whether the market has been correct in pushing odds of a March hike, therefore boosting the USD," said ANZ senior economist Philip Borkin in a research note.

New Zealand government bonds gained, sending yields 1 basis point lower at the long end of the curve.

Australian government bond futures eased, with the three-year bond contract down three ticks at 97.940. The 10-year contract slipped 3.5 ticks to 97.150.

REUTERS