Australia, NZ dlrs draw short straw in Sino-US trade feud
By Wayne Cole and Charlotte Greenfield
SYDNEY/WELLINGTON, Sept 10 (Reuters) - The Australian and
New Zealand dollars wallowed at multi-month lows on Monday as
the risk of a deepening Sino-U.S. tariff dispute spooked
investors from trade-exposed currencies.
The Aussie dollar huddled at $0.7106, after losing
1.3 percent on Friday as the U.S. dollar surged in the wake of
upbeat U.S. jobs data. The retreat snapped support in the
$0.7140/50 zone and took it to ground last trod in early 2016.
"The Aussie continues to break lower, the next major
downside target being the $0.7000 area," wrote analysts at
Westpac in a note.
"The Aussie's slide left it quite oversold when judged by
our short-term fair value estimate, which remains near $0.7500,"
they added. "Still, risks probably remain to the downside."
U.S. President Donald Trump warned on Friday he was ready to
slap tariffs on virtually all Chinese imports into the United
States, threatening duties on another $267 billion of goods on
top of $200 billion in imports primed for levies in coming days.
The moves would escalate Trump's trade war with Beijing over
his demands for major changes in economic, trade and technology
policy. China has threatened retaliation, including action
against U.S. companies there.
China is Australia's largest export market and the world's
biggest buyer of commodities, two reasons investors use the
Aussie as a liquid proxy for China plays.
The U.S. dollar also got a big boost from a strong jobs
report which showed the fastest wage growth since 2009 and led
markets to price in quicker rate hikes from the Federal Reserve.
With the Reserve Bank of Australia (RBA) signalling it is on
hold for the foreseeable future, yields on U.S. two-year debt
rose to be 69 basis points over Australian paper.
That was the widest gap since the late 1990s and a burden for
the local currency.
The New Zealand dollar was pinned at $0.6527,
having shed 0.9 percent on Friday to hit its lowest since
"The NZD is likely to start this week in a similar vein to
how it finished the last: on the back foot," said Liz Kendall,
senior economist at ANZ Bank, adding that the currency would
find support at around $0.6500.
"While the market is still digesting the implications of the
strong U.S. wage growth numbers, the main focus is likely to be
trade, as rhetoric ramps up further."
New Zealand government bonds eased, sending
yields 3 basis points higher along most of the curve.
Australian government bond futures slipped in line with
Treasuries, with the three-year bond contract off 3.5
ticks at 97.965. The 10-year contract eased 4 ticks to
(Editing by Kim Coghill)
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