Australian, New Zealand dollars hit by US capital tax doubling plan

[SYDNEY] The Australian dollar ran into technical chart resistance on Friday to slip to a one-week low as reports US President Joe Biden was planning to nearly double capital gains tax on wealthy Americans hit risk appetite.

The Australian dollar went as low as US$0.7693, a level not seen since April 14 as investors spooked by the prospect of higher taxes drove to safe haven assets such as the US dollar, the Japanese yen and Treasuries.

The Aussie, which is often traded as a liquid proxy for risk, is down 0.2 per cent this week so far following two consecutive weekly gains. It was last quoted at US$0.7717.

"US shares fell with the AUD losing ground in sympathy after Biden announced plans to double capital gains tax for people on incomes of more than US$1 million," said Steven Dooley, currency strategist for Western Union Business Solutions.

"The plans, widely discussed during the campaign, could have a significant impact on the timing and tax implications of share transactions," Mr Dooley added.

The New Zealand dollar extended losses from Thursday after the government said it intended to regulate bank lending standards, traditionally the domain of the Reserve Bank of New Zealand (RBNZ).

The kiwi went as low as US$0.7151, a level not seen since April 19. For the week, the kiwi is a shade higher, on track for its fourth consecutive weekly rise.

Next week, investors will watch out for first-quarter consumer price data in Australia which is expected to show inflation still undershooting the country's central bank's 2-3 per cent target despite hefty monetary and fiscal stimulus.

New Zealand government bonds eased, sending yields about 2-3 basis points higher across the curve.

Australian government bond futures slipped too, with the three-year bond contract down 2.5 ticks at 99.705. The 10-year contract was off 3.5 ticks to 98.31.

REUTERS