Australian, New Zealand dollars fall on Omicron concerns

[SYDNEY] The Australian and New Zealand dollars fell on Tuesday against the greenback, on fresh concerns about the spread of the Omicron variant of Covid-19, hurting sentiment and risk-sensitive currencies.

The Aussie, a proxy for risk appetite, fell 0.55 per cent to US$0.7096, the lowest since Dec 7. It faces resistance at about US$0.718 and has immediate support around US$0.705, before facing its recent yearly low of US$0.699.

The kiwi was likewise 0.16 per cent lower at US$0.6740, before touching a yearly low of US$0.6735.

Uncertainty about the Omicron coronavirus variant rattled investors who sought the safety of haven assets like the US dollar and bonds, which also benefited from expectations of a hawkish Federal Reserve meeting this week.

Stocks across Asia fell as health authorities in China fight the spread of Omicron, while Britain reported the first death from the variant.

"We still see a risk, albeit fading, that AUD again dips below 0.70 if news about Omicron is negative," said Commonwealth Bank strategists in a note to clients. "A hawkish FOMC policy meeting can weigh on AUD later in the week."

The Fed is expected to announce on Wednesday it will wrap up its bond buying stimulus sooner than previously communicated, potentially setting up earlier interest rate increases next year.

Both Australian and New Zealand bonds made gains, with 10-year yields of Australian government bonds trading 7 basis points lower to 1.546 per cent, while three-year yields fell five basis points to 0.856 per cent, a weekly low.

New Zealand bonds were also higher, pushing yields between three and four basis points lower across the curve.

REUTERS