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Australia, NZ dollars lower on geopolitical risks, greenback rally


[SYDNEY] The Australian and New Zealand dollars hit multi-week lows on Monday, as risk-averse investors drove to safer assets and the greenback rallied following a US central banker's comments on further interest rate hikes.

A drop in iron ore and coking coal prices - Australia's top export earners - also weighed on the local dollar.

The Australian dollar slipped for a third straight day to US$0.7480, a level last seen in mid-January. The Aussie has fallen in seven out of the last ten sessions, ending last week down 1.6 per cent, its worst weekly performance since late December.

Analysts expect the Aussie could slip to 74 US cents, with immediate chart support seen at US$0.7455.

Market voices on:

New York Federal Reserve President William Dudley said there maybe only a "little pause" in the central bank's rate hike plans this year. This contrasted with market interpretations of earlier comments that there could be a more significant delay in Fed tightening this year, as it looks to shrink its balance sheet.

Locally, data out on Monday showed home loans had retraced slightly in February, a welcome sign for policymakers who have been hoping for a slowdown in lending in the country's frothy property market.

"Looking forward, we continue to expect the Reserve Bank of Australia (RBA) to initially assess the impact of macroprudential tightening, instead of hiking rates," said UBS economist George Tharenou.

Futures market ascribe a 12 per cent chance of an RBA rate hike later in the year.

Investors were also watching developments in the Syrian civil war following US missile strikes on an airbase in Syria last week that pumped up safe haven assets, such as the yen and gold.

Geopolitical tensions in Asia were also in focus, after the US decision to move a Navy strike group toward the Korean peninsula.

The Aussie ticked higher on the yen on Monday, but stayed near a 4-1/2 month trough hit last week. The pound was at a four-month peak, while the Swiss franc was at a two-week high on the Aussie.

The New Zealand dollar fell for a third straight day to US$0.6929, the lowest since March 15. It fell about one per cent last week, its worst weekly showing since March 10.

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

Australian government bond futures slipped too, with the three-year bond contract down three ticks at 98.16. The 10-year contract fell four ticks to 97.38.