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Australian, NZ dollars stay low, eye on Trump's healthcare bill
[SYDNEY] The Australian dollar stayed near one-week lows on Thursday as investors unwound carry trades while watching to see whether U.S. President Donald Trump can push through a healthcare bill, as failure could signal problems to come pursuing his economic agenda.
Financial markets' immediate focus is on whether Mr Trump can gather enough support at a vote later in the day to rollback Obamacare, one of his key campaign pledges.
Investors have become worried that if the White House fails at this hurdle, progress on fiscal stimulus and tax cuts might be derailed. The jitters have hurt risk sentiment globally and undermined commodity prices, which is bad for Australia.
The Australian dollar was down 0.26 per cent at US$0.7657, after falling as low as US$0.7640 the previous session.
The Aussie is already down 0.6 per cent this week, after a stellar 2 per cent gain last week, as investors rushed to safe havens such as the yen, bonds and gold.
Also working against the Aussie was a steep fall in the price of iron ore - the country's top export earner.
The September iron ore contract on the Dalian Commodity Exchange has fallen over 10 per cent in the past week.
The Aussie was weak on other crosses too. It stayed near 2-1/2 month lows on the yen and was close to a 1-1/2-week trough on the euro. The pound stood at a one-month peak against the Aussie.
The New Zealand dollar eased 0.3 per cent to US$0.7035, drifting further away from a two-week high of US$0.7090 touched on Tuesday.
The Reserve Bank of New Zealand (RBNZ) held official interest rates at a record low on Thursday, as widely anticipated, and reiterated it would stay on hold for a"considerable" period of time. "We agree with the RBNZ that the OCR will remain on hold for some time," Michael Gordon, acting chief economist for New Zealand at Westpac. "We've pencilled in two OCR increases in the first half of 2019, but the way we'd describe this more generally is that the first rate hike is too far away to be precise about the timing."
New Zealand government bonds edged higher after the statement, sending yields as much as 3 basis points lower at the short end of the curve.
Australian government bond futures were unchanged, with the three-year bond contract at 97.980. The 10-year contract held at 97.2050.