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Australia, NZ dollars pause near multi-month lows after November losses

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The Australian dollar paused near a five-month trough on Friday and its New Zealand cousin held near 1-1/2 year lows as their US counterpart gained ground.

[SYDNEY] The Australian dollar paused near a five-month trough on Friday and its New Zealand cousin held near 1-1/2 year lows as their US counterpart gained ground.

During November, the Aussie shed 1.2 per cent against the US dollar while the New Zealand dollar was battered, losing nearly 5 per cent.

On Friday, the Aussie was down a tad at US$0.7558. If it ends lower, Friday will be the sixth straight day of falls, the longest losing streak since early 2016.

For the week, the Australian dollar was already down 0.8 per cent. With the November loss, it has weakened for four straight months.

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The New Zealand dollar fell for a fourth consecutive session to US$0.6845. For the week, the kiwi is down 0.3 per cent.

The losses have been largely led by gains in the US dollar as near-term Treasury yields ground higher amid expectations the Federal Reserve will stick to its tightening path in 2018.

Investors have recently been focussed on narrowing yield differential between Aussie and US bonds, which has diminished the Aussie dollar's appeal as a carry trade currency.

The premium between Aussie and US 10-year bonds shrank to the smallest since 1998 at 13 basis points. The spread of two-year notes has turned negative for the time since 2000.

But attention will likely veer from yields with a deluge of data next week, including figures on Australia's gross domestic product.

Analysts have predicted the A$1.7 trillion (S$1.73 trillion) economy may have accelerated toward 3 per cent annual growth in the third quarter, led by solid business and public spending.

"The broader economic picture is turning positive," economists at ANZ said in a note.

"Any better-than-expected outcomes may provide some upside for the Aussie." In New Zealand, terms of trade hit a record high in the third quarter, pointing to a brighter economic outlook.

The ratio of export prices to import prices grew 0.7 per cent in the three months to September, slightly missing expectations for a 0.9 per cent jump.

The currency was battered on Thursday after a survey showed business sentiment plummeted to an eight-year low in November as firms fretted about a change of government.

Separate data showed residential consents in October slipped a surprisingly sharp 9.6 percent from a year earlier.

New Zealand government bonds gained, sending yields about one basis point lower across the curve.

Australian government bond futures eased, with the three-year bond contract down three ticks at 98.050. The 10-year contract was off 3.5 ticks at 97.45.

REUTERS

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