Australia, NZ dollars head for heavy weekly losses on yen, USD

[SYDNEY] The Australian and New Zealand dollars nursed losses against their US counterpart and yen on Friday as global growth worries resurfaced, putting them on track for heavy weekly falls.

The Australian dollar held at US$0.7530, having slipped 1.2 per cent on Thursday and pulling away from a nine-month peak of US$0.7723 touched last week.

Much of the retreat is due to heavy bank share selling globally, with lenders in Europe and Japan in particular struggling against negative interest rates.

Also undermining appetite for commodity currencies was a large drop in copper prices.

"Another wave of risk-off sentiment has gripped the market with the Aussie dollar now testing the US$0.7500 level," said Stephen Innes, a senior trader at FX and CFD firm OANDA Australia and Asia Pacific.

A steep rise in the yen has also caught out many investors who had borrowed yen to build long US dollar positions early in the year. The short-covering rippled through all the yen crosses with the Aussie sliding 2.6 per cent on Thursday to be last at 82 yen.

It was on track with a weekly fall of 4.1 per cent , the second largest this year.

Likewise, the New Zealand dollar dropped 2 per cent to a seven-month trough in the last session to be last at 75.85 yen. It has skidded more than 4 per cent so far this week.

"JPY was the main focus as it continued to strengthen as markets re-evaluated the efficacy of monetary policy with respect to currencies. If sustained this could herald a sea change in the way global currencies react to monetary policy,"said ANZ analysts in a research note.

Some have come to doubt the Bank of Japan can go any further in easing given that's its move into negative interest rates actually saw the yen rise, while damaging Japanese banking shares and the Nikkei average.

Against the US dollar, the kiwi stood at US$0.6789, from a peak of US$0.6864 the previous day. It has lost 1.7 per cent this week.

New Zealand government bonds gained, sending yields two basis points lower at the short end of the curve and five basis points lower at the long end of the curve.

Australian government bond futures rose, with the three-year bond contract up four ticks at 98.210. The 10-year contract rose five ticks to 97.6000, while the 20-year contract added six ticks to 97.0200.


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