Australia, NZ dlrs stay near 2-1/2 year lows as trade war intensifies

By Swati Pandey

SYDNEY, Sept 12 (Reuters) - The Australian and New Zealand dollars eased on Wednesday to hold near 2-1/2 year lows as investors preferred safer bets amid a deepening rift over trade tariffs between the United States and China.

The Australian dollar slipped 0.3 percent to $0.7099. On Tuesday, it touched $0.7085, a level not seen since February 2016. The Aussie has slid more than 9 percent this year, reversing all of its 2017 gains.

The New Zealand dollar was last at $0.6510 after Tuesday's slip to $0.6501, also its lowest since February 2016. The kiwi, after a 2.3 percent gain last year, has lost 8.2 percent of its value so far in 2018.

The antipodean currencies have taken a knock from the verbal sparring between Washington and Beijing as trade tensions between the world's two biggest economies escalate.

China told the World Trade Organization (WTO) on Tuesday it wanted to impose $7 billion a year in sanctions on the United States in retaliation for Washington's non-compliance with a ruling in a dispute over U.S. dumping duties.

Separately, President Donald Trump told reporters on Tuesday that the United States was taking a tough stance with China.

The Aussie was further weighed down by domestic data that showed the weakest consumer sentiment reading since November, as political squabbling in Canberra and hikes in mortgage rates by most of the big banks soured the public mood.

The Melbourne Institute and Westpac Bank index of consumer sentiment fell 3.0 percent in September from August, when it dropped 2.3 percent.

"If sustained this will be a drag on consumer spending and supports the case that households won't be comfortable continuing to run down their saving rate," AMP chief economist Shane Oliver said in a note.

"The soft readings on consumer and business confidence are consistent with our view that the RBA will be on hold for a long time yet and that it's premature to rule out the next move in rates as being down."

The Reserve Bank of Australia (RBA) has kept rates at an all-time low 1.50 percent, and most analysts expect this record period of stable policy to extend for at least another year.

New Zealand government bonds eased, sending yields about 2 basis points higher at the long-end of the curve.

Australian government bond futures were barely changed, with the three-year bond contract flat at 97.975 and the 10-year contract off half a tick at 97.4125. (Editing by Richard Borsuk)

2018-09-12 06:20:35

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