Australian and NZ dollars struggle, downside risks loom

by **Cals** Wed 27 Nov 2013, 11:15

Business & Markets 2013

Written by Reuters

Wednesday, 27 November 2013 10:41

SYDNEY/WELLINGTON (Nov 27): The Australian and New Zealand dollars hovered just above multimonth lows on Wednesday and looked set to remain on the backfoot amid uncertainty over when the U.S. Federal Reserve will start to wind back its stimulus programme.
The Aussie stood at $0.9107, from $0.9133 early, after touching a three-month low of $0.9088 overnight.
Appetite for the U.S. dollar remained steady on speculation that the Fed will begin tapering some time early next year.
"It ebbs and flows, but it's been slowly shifting to earlier and most currencies are struggling, especially the higher betas like the Aussie and kiwi," said Westpac senior currency strategist Imre Speizer.
"And Aussie has been really worse because the market is rethinking that it may have to price in an RBA cut early next year, which has pushed down short-term interest rates and with it the Aussie."
The Aussie has fallen about 6.6 percent since hitting a three-month high of $0.9759 in October. Speculators have turned bearish on the currency and looked for opportunities to sell amid intervention talk by the Reserve Bank of Australia and a cooling economic outlook.
Near-term support for the Aussie was seen at $0.9070 and more solidly at $0.9038, with resistance at $0.9145.
The next key event for the Aussie is Thursday's quarterly data on corporate investment, which will be scrutinised for signs non-mining sectors are stepping up to cover the cooling boom in the resources sector.
The New Zealand dollar was not faring much better than its Aussie cousin, at $0.8172 from a local open around $0.8220. It has remained supported at $0.8150 and then more solidly at Friday's two-month low of $0.8125, with resistance at $0.8230.
The kiwi has been taking some comfort from its better economic and rate outlook against the Aussie, which has fallen to its lowest versus the New Zealand currency since late 2008.
However, the currency gained nothing from better-than-expected trade data on Wednesday, which showed the smallest October monthly deficit since 1996 and a narrowing of the annual deficit.
Westpac's Speizer said momentum for both Antipodeans was negative and there was every prospect for further losses over coming weeks.
"The Aussie has broken down and it's on a good slide towards the high 80s (U.S. cents)," he said, adding that kiwi looked a little stronger but was still eyeing below $0.8000.
New Zealand government bond prices edged higher, sending yields 1.5 basis points lower along the curve.
Australian government bond futures rose with the three-year bond contract up 2 ticks at 96.930. The 10-year contract added 3 ticks to 95.850. - Reuters