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Australia, NZ dollars dragged down by China woes, lower commodity prices

[WELLINGTON] The Australian and New Zealand dollars slipped on Friday amid broad strength in their US counterpart and on lingering concerns from an unexpected slump in China's manufacturing activity.

The Australian dollar fell to a three-week low of US$0.7372, down half a US cent in the past 24 hours and poised to end the week around 0.7 per cent lower.

The Aussie had struggled to recover ground after a survey on Thursday of top trading partner China showed the Asian giant's manufacturing activity had contracted for the first time in nearly a year.

It then faced an uphill battle as the US dollar rallied overnight on upbeat U.S. private sector job figures as investors awaited the closely-watched non-farm payrolls report for another potential boost.

Market voices on:

"Throw in another near two percent fall in iron ore prices and growing expectations that...Australian growth could come in negative, and the makings of a depreciating AUD are there," said Jason Wong, currency strategist at BNZ Bank, referring to Australia's first quarter gross domestic product data due out on Wednesday.

Nevertheless, the Aussie would likely find buyers around the key technical level of 0.7330, analysts say.

The currency fell to a four-month low of A$1.0445 against the neighbouring Kiwi.

The New Zealand dollar edged down slightly against the greenback to US$0.7069 from around US$0.7090 the previous day, struggling to climb beyond the three-month high of US$0.7123 hit on Wednesday. The currency was set to be largely flat on a weekly basis.

Trading in the Kiwi would likely be fairly quiet in coming days with a public holiday on Monday. The next main event is on Wednesday when a closely watched auction for dairy - New Zealand's largest goods export earner - would show whether prices continued to recover.

Australian government bond futures eased, with the three-year bond contract off two ticks at 98.300. The 10-year contract edged 1.5 ticks lower to 97.5600, while the 20-year contract also shed 1.5 ticks to 97.0100.

Meanwhile, the spread between Australian and US 2-year government bonds steadied at a 16-year low of 28 basis points.

New Zealand government bonds eased, sending yields 5 basis points higher at the long end of the curve.