Aus­tralia, NZ dlrs shoved to side­lines as stocks slide

The Financial Daily - - NATIONAL -

SYD­NEY: The Aus­tralian and New Zealand dol­lars nursed losses on the yen and euro on Thurs­day as a slide in global share mar­kets sent skit­tish in­vestors scam­per­ing to safe havens.

That left the Aussie and kiwi strangely steady on the US dol­lar as in­vestors favoured cur­ren­cies from re­gions with siz­able cur­rent ac­count sur­pluses.

The Aussie ac­tu­ally edged up a frac­tion to $0.7073, though that fol­lowed a re­treat from $0.7130 overnight. The kiwi like­wise added 0.3 per­cent to $0.6467, hav­ing fallen back from $0.6496 on Wed­nes­day.

The US dol­lar was ham­pered in part by a pull­back in Trea­sury yields, with the 10-year off at 3.15 per­cent from a seven-year top of 3.26 per­cent touched ear­lier in the week.

The Aussie had less luck on the euro which reached its high­est since Au­gust 2015 at A$1.6358, hav­ing gained 0.8 per­cent overnight.

The Aussie also lost 1.2 per­cent on the yen be­fore steady­ing some­what around 79.30 yen on Thurs­day.

"AUD/JPY was hit hard by the tu­mult in eq­uity prices, as usual," said Joseph Ca­purso, a se­nior cur­rency strate­gist at CBA. "It has fur­ther down­side if US earn­ings sea­son - which has only just be­gun - is a bad one for eq­uity prices."

The S&P 500 suf­fered its largest one-day fall since Fe­bru­ary and stocks across Asia were all un­der wa­ter.

Eyes were now on US in­fla­tion data due later Thurs­day where a high read­ing would likely add to the risk of a more ag­gres­sive tight­en­ing by the Fed­eral Re­serve and sour risk sen­ti­ment yet fur­ther.

At home, Re­serve Bank of Aus­tralia (RBA) As­sis­tant Gov­er­nor Luci El­lis un­der­lined the need for low in­ter­est rates to help the econ­omy ab­sorb spare ca­pac­ity in the labour mar­ket.

Rates have been at a record low of 1.5 per­cent since mid-2016, and the bank has in­di­cated they will re­main there for some time yet.

New Zealand gov­ern­ment bonds ben­e­fited from the rush to safe havens, push­ing yields down 2 to 4 ba­sis points.

Aus­tralian gov­ern­ment bond fu­tures also ral­lied, with the three-year bond con­tract up 3 ticks at 97.890. The 10-year con­tract added 4 ticks to 97.2700.

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