Australian dollar extends losing streak, kiwi endures rate pain
SYDNEY, Oct 10 (Reuters) -The Australian dollar extended its losing streak on Thursday as the lack of China stimulus news and shifting U.S. rate cut expectations turned against it, while the kiwi nursed heavy losses on the odds of even larger rate cuts.
The Aussie AUD=D3 held at $0.6716, having lost 0.4% overnight in the fifth straight session of declines which have seen it hit as low as $0.6708.It fell 3% from its September peak to hover close to a three-week low, with bears now targetting the 200-day moving average of $0.6627.
The kiwi dollar NZD=D3 bounced 0.1% to $0.6071, after plunging 1.2% overnight to as low as $0.6050, a seven-week trough. It also broke key support at the 200-day moving average of $0.6096 as the Reserve Bank of New Zealand on Wednesday stepped up its policy easing with a half-point move.
Swaps now imply a 13% chance that the RBNZ could even cut by a 75 basis point in November, a reason that the kiwi AUDNZD=R lost 0.8% on the Aussie overnight to the lowest in 2-1/2 months. 0#RBNZWATCH
The near-term fate of both currencies now rests on the U.S. consumer inflation data due later in the day where a hot print would add to the doubt that the Federal Reserve may not cut rates at all in November.
Futures now imply a small 20% chance the Fed would stay put next month following a strong jobs report.
"An upside surprise in U.S. CPI could force the Fed to doubt its confidence about the path for inflation," said Kyle Rodda, analyst at Capital.com.
"The U.S. dollar is regaining supremacy, in part due to disappointment about stimulus prospects out of China, but mostly because of continued U.S. economic outperformance."
The Aussie - a liquid proxy for the Chinese yuan given the country's economic reliance on China - has also been dragged lower by investor disappointment that there has been no major stimulus announcement from Beijing in recent days, which sent prices for iron ore lower.
China's ministry of finance, however, scheduled a press conference for Saturday, keeping hopes of fiscal stimulus alive.
Analysts at HSBC believe the Australian dollar has further to climb, citing the currency's cheap valuation on their models and China's policy support.
"Markets appear to be casting doubt on whether the positive sentiment can be matched by actual economic benefits... We are more optimistic. We believe what matters most for the AUD is not the immediate size or effectiveness of the policy measures, but the 'policy put' co-ordinated across fiscal and monetary authorities," they said in a note to clients.
Reporting by Stella Qiu; Editing by Michael Perry
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
