Friday, 27 March 2015 10:37
SYDNEY/WELLINGTON: The Australian dollar eased on Friday, continuing to pull back from a two-month peak set earlier in the week as investors reassessed their positions ahead of a speech by Federal Reserve Chair Janet Yellen.
The Australian dollar last traded at $ 0.7795, down 0.4 percent on the day.
It has fallen more than 1 percent since hitting $ 0.7939 on Tuesday, hurt in part by a fresh decline in iron ore prices. On the week, it is still a shade firmer.
“Aussie traders continue to be on guard for verbal intervention from the Reserve Bank of Australia (RBA), which in theory should be a limiting factor for the Aussie dollar gains and probably explains the wall of resistance at $ 0.7900 level,” said Stephen Innes, senior trader at OANDA Asia Pacific.
The Aussie has recently benefited from a squeeze in short positions that swept it off a six-year trough of $ 0.7561. This was partly due to a turn in bullish US dollar sentiment after the Federal Reserve gave a dovish spin last week.
But analysts expect it will only be a matter of time before the Aussie falls to fresh lows given the diverging interest rate expectations between the Fed and RBA.
Debt markets imply a quarter-point cut to the cash rate by mid-year and have 55 basis points worth of easing priced in over the year.
Fed Chair Janet Yellen speaks on “Monetary Policy,” before the Federal Reserve Bank of San Francisco Conference later in the day.
The New Zealand dollar was a touch lower at $ 0.7571, with traders seeking fresh cues after an overnight session that saw the currency test support and resistance levels. The kiwi reached an offshore high of $ 0.7664, before stronger US data knocked it back to a low of $ 0.7557.
“Further failed topside attempts for the NZD could spell the last of (the) exhaustive energy spent trying to move through resistance at 77 US cents,” ANZ analysts said in a note.
They also noted that weaker dairy futures prices, which eased on the announcement of increased supply at coming auctions, were further weighing on the kiwi.
In the near term, the kiwi has a solid base at $ 0.7550, but a concerted breach of that could open the way to a low of $ 0.7450. Initial resistance is seen at the 100-day moving average around $ 0.7620/30.
New Zealand government bonds were softer, sending yields 3.5 basis points higher along the curve.
Australian government bond futures followed a negative lead from US Treasuries. The three-year bond contract eased 5 ticks to 98.260, pulling further away from an all-time peak of 98.330. The 10-year contract slid 8.5 ticks to 97.5900.
Copyright Reuters, 2015
