Australian, NZ dollars at multi-week lows; PMIs, inflation data in focus

Sydney

THE Australian and New Zealand dollars loitered around multi-week lows on Monday while bonds skidded as the greenback jerked higher amid rising inflation expectations in the United States.

The Australian dollar held at US$0.7676 after hitting a two-week trough of US$0.7655 on Friday. The currency slipped 1.3 per cent last week, its biggest weekly fall since mid-March.

The New Zealand dollar stumbled to US$0.7199, the weakest since April 3. It has extended its run of losses to five days now, the longest stretch since mid-November when it fell for eight sessions on the trot. The kiwi declined 1.9 per cent last week, its worst showing since mid-October.

Investors anxiously awaited surveys on global manufacturing for April due later in the day to ascertain whether the slowdown in the first quarter was temporary.

They also looked ahead to Australian consumer price data due on Tuesday with March quarter core inflation seen at 1.8 per cent, below the central bank's target band of 2-3 per cent.

Traders say the Aussie could fall below critical chart support of US$0.7650 if the inflation figures miss forecasts amid bets the Reserve Bank of Australia (RBA) will prolong its spell of stable rates.

"For the AUD, all eyes will be on consumer price data tomorrow," ANZ analysts said in a note. "But, before that, PMIs today will be key as they'll set the stage for risk appetite. The latter continues to suggest the bias remains lower for the Aussie."

The RBA has held interest rates at a record low 1.50 per cent since August 2016 and is widely expected to extend the stretch for another year.

Its New Zealand counterpart is also likely to sit pat after leaving rates at all-time lows since late 2016.

The antipodeans' stable policy outlook contrasts with the US Federal Reserve which is expected to raise rates at least two more times this year.

Inflation expectations got a boost last week when oil prices hit a more than 3-1/2-year peak, sending 10-year Treasury yields to levels not seen since early 2014.

The last time yields neared the critical 3 per cent barrier in 2013 it ruptured risk appetite and sent stocks sliding. Other major central banks are also on a tightening path. The Bank of Canada has flagged further interest rate hikes this year and the Bank of England is also expected to move rates up, albeit slowly.

New Zealand government bonds eased, sending yields about 3.5 basis points higher at the long end of the curve. The Australian three-year bond futures contract hit its lowest since late 2015. It was last down four ticks at 97.690. The 10-year contract slipped six ticks to a two-month trough of 97.120. REUTERS