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Australian, New Zealand dollars weaken on fears of virus impact on economy
[SYDNEY] The Australian and New Zealand dollars nursed losses on Wednesday as risk appetite weakened over fears about the hit to world economies from the coronavirus outbreak.
The new coronavirus has caused 2,004 deaths in China and infected more than 74,000 people, while measures to contain it have paralysed the economy and the supply chains it feeds.
The Australian dollar steadied at US$0.6688 after stumbling 0.4 per cent on Tuesday to as low as US$0.6674, a level not seen since Feb 10.
Technical chart support lies around US$0.6670, a break below which could see it tumbling to an 11-year trough of US$0.6657.
The New Zealand dollar was a tad firmer at US$0.6393 after stumbling 0.8 per cent in the previous session.
The losses on Tuesday came as tech giant Apple said it was unlikely to meet a sales target set just three weeks ago amid lost production and weakening demand in China from the outbreak.
Auto makers are idling plants for lack of parts.
The blow to risk appetite saw a sell-off in exporter currencies, while the yield curve between US three-month bills and 10-year notes inverted overnight, a bearish economic signal.
Domestically, there was little to move the antipodean currencies the other way.
Meanwhile, Australia's annual wage price index rose a tepid 2.2 per cent in the final quarter of last year with pay rewards in the public sector slowing to the weakest pace on record, according to data released on Wednesday.
The Reserve Bank of Australia (RBA) is predicting this pedestrian pace of wage growth to extend through mid-2022 as the jobless rate is not seen dipping materially during that time.
Minutes of the RBA's February policy meeting out this week showed its board thought easing policy further might accelerate the process, but judged the risks of ever-lower low rates outweighed the benefits.
The RBA has estimated the unemployment rate needs to fall below 4.5 per cent from 5.1 per cent currently for wages to grow at 3 per cent or more.
"We are years away from achieving those goals," said Callam Pickering, APAC economist for job portal Indeed.
"We consider it unlikely that wage growth will improve much during 2020. And so we also expect household spending and inflation to remain disappointing," he added.
"We believe it is likely that the Reserve Bank will need to cut rates again by mid-year, with a second cut not out of the question."
Tuesday's losses in the kiwi were also compounded by dour results of a fornightly global dairy auction in which prices and volumes dropped for a second consecutive time.