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Australia, NZ dollars run into stiff resistance, Fed speculation


[SYDNEY] The Australian and New Zealand dollars fell on Wednesday as a bounce from recent lows was stymied by heavy chart resistance and speculation US interest rates could rise as early as June.

The Australian dollar slipped to US$0.7293, from US$0.7326 early on and a peak of US$0.7368 touched on Wednesday. It met a wall of resistance near US$0.7380-US$0.7410, having failed five times this month to make a sustained breakthrough that range.

It was unable to hold gains made on Tuesday when minutes of the May meeting of the Reserve Bank of Australia (RBA) wrong-footed some investors, prompting the market to trim the chance of an interest rate cut.

Interbank futures are pricing a 26 per cent chance of a cut in July, from 36 per cent on Tuesday, though they are still fully priced for a move by the end of the year.

Also undermining the Aussie was rising expectations the US Federal Reserve (Fed) may raise rates later this year.

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"The reversal in overnight risk sentiment on the back of hawkish US Fed rhetoric has temporarily capped the short term Aussie momentum," said Stephen Innes, a senior currency trader at FX and CFD firm OANDA Australia and Asia Pacific.

The New Zealand dollar was also caught up in the Fed downdraft after two days of gains. It eased to US$0.6791, having been repelled by major resistance near US$0.6845.

Even a lift in prices at a global dairy trade auction held overnight failed to boost the kiwi.

Global milk prices rose 2.6 per cent, but provided little surprise to investors given they were in line with dairy futures pricing.

The Aussie pared gains versus its Kiwi neighbour to NZ$1.0733, from a peak of NZ$1.0805 touched on Tuesday.

New Zealand government bonds eased, sending yields 2.5 basis points higher at the long end of the curve.

Australian government bond futures edged up, with the three-year bond contract one tick higher at 98.410.

The 10-year contract added two ticks to 97.7250, while the 20-year contract gained half a tick to 97.0750.


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