Australia, NZ dollar drift near multi-month lows after Fed rate remarks

[SYDNEY] The Australian and New Zealand dollars were pinned near multi-month lows on Monday after comments by Federal Reserve Chair Janet Yellen reinforced expectations of a US interest rate hike as early as June.

The Australian dollar fell to US$0.7169, from US$0.7186 late on Friday. A break of a three-month trough of US$0.7145 would target the double bottom of US$0.7108.

Having lost 0.5 per cent last week, the Aussie was on track for its largest monthly drop in around 18 months with a 6 per cent fall, mainly due to speculation that US rates will go up soon.

Ms Yellen said on Friday that a rate increase in the coming months "would be appropriate", if the economy and labour market continued to improve.

Also undermining the Aussie was a further reduction in speculative long Aussie positions with net longs at just 124 contracts the week ending May 24, down from 25,000 in the previous week.

Sean Callow, a senior currency strategist at Westpac said it was the least bullish stance since 15 March.

Investors were cautious ahead of a busy week at home with gross domestic product, retail sales and trade data due for release.

The New Zealand dollar touched its lowest in two months at US$0.6676, weakening from US$0.6703 in early trade. It was last at US$0.6694.

Support was found at US$0.6670, then US$0.6654.

The kiwi has dropped 4 per cent this month, partly due to a disappointing milk payout forecast by cooperative Fonterra. Dairy is New Zealand's top export earner.

The Aussie continued its rebound against the Kiwi, strengthening to NZ$1.0717 from a low of NZ$1.610 touched last week.

New Zealand government bonds eased, sending yields 2 basis points higher at the long end of the curve and four basis points higher at the short end of the curve.

Australian government bond futures eased, with the three-year bond contract off 3 ticks at 98.380. The 10-year contract slipped 1.5 ticks to 97.7300, while the 20-year contract was off 1 tick at 97.1250.

REUTERS