Australian, New Zealand dollars hit 3-month lows, upbeat data no help

[SYDNEY] The Australian and New Zealand dollars were pinned near three-month lows on Friday and heading for another week of hefty losses as a fresh bout of global risk aversion overshadowed economic strength at home.

Some pointed to a warning from British authorities that a newly identified coronavirus variant spreading in South Africa could make vaccines less effective.

The Aussie was off 0.5 per cent at a three-month trough of US$0.7159 as markets across Asia declined. That brought the fall for the week to 1.1 per cent, its fourth straight week of losses.

Bears were now eyeing the August low of US$0.7106 and a break would open the way to a low from November last year at US$0.6990.

The kiwi dollar fared even worse with a savage drop of 2.4 per cent for the week to US$0.6830. That was just a whisker from the August nadir at US$0.6807 and a breach would again return it to depths not seen since last November.

The retreat is in part the result of a broad-based rally in the US dollar as economic data there runs hot and the Federal Reserve sounds more hawkish.

"The US economy is booming and key Fed officials are talking about speeding up tapering, so the dollar train is likely to keep rolling," said Richard Franulovich, head of FX strategy at Westpac.

"Lower levels beckon for both AUD and NZD near term." While the Fed is talking of a quicker taper, the Reserve Bank of Australia (RBA) continues to insist that a rate hike is unlikely for all of next year.

The Reserve Bank of New Zealand (RBNZ) has already delivered its second hike, but still managed to disappoint hawks by limiting it to 25 basis points rather than 50.

Upbeat domestic data has offered some support with Australian retail sales jumping 4.9 per cent in October, almost double market forecasts, as lockdowns began to be lifted.

Bonds got a boost from the general air of risk aversion with Australian 10-year yields back at 1.81 per cent, compared to the top for the week of 1.93 per cent.

New Zealand two-year swap rates extended their post-RBNZ decline to 2.15 per cent, a drop of 28 basis point for the week. Markets are fully priced for another rate hike at the next RBNZ meeting in February, but have sharply scaled back wagers on a half-point move.

REUTERS