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Australia, NZ dollars swept lower on broad USD strength

Published 04/01/2016, 12:38 pm
Updated 04/01/2016, 12:40 pm
Australia, NZ dollars swept lower on broad USD strength
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By Cecile Lefort

SYDNEY, Jan 4 (Reuters) - The Australian dollar kicked off the new year on a lower note on Monday in light post-holiday trade, but was hovering near six-month highs against a soggy pound.

The Australian dollar dropped to $0.7233 against a broadly firmer U.S. dollar, from $0.7285 on Thursday, pulling closer to a trough under 71 cents touched mid-December.

Traders said the move was exaggerated by a lack of liquidity with many market players still out after the holidays.

The Aussie shed nearly 11 percent in 2015 in a third year of losses on falling commodity prices, rate cuts by the Reserve Bank of Australia (RBA) and prospects of slower growth in China.

Yet, the Aussie has proved relatively resilient to a sharp fall in the prices of iron ore, the nation's top export earner.

A source of major support for the Aussie is a global yield hunt with local 2-year government bonds fetching more than 2 percent. This compares with near zero rates in Japan and even negative returns in Germany and France.

Sterling held at A$2.0326, having dropped 21 cents since June. A break under A$2.0161-68, the 61.8 percent retracement of the March-August climb, could see a move all the way to A$1.8809.

Across the Tasman sea, the New Zealand dollar NZD=D4 fell nearly 1 percent in the session to $0.6765 in light trade with financial markets there shut for a public holiday. They will re-open on Tuesday.

The kiwi lost more than 10 percent in 2015, but dairy prices showed signs of bottoming out last year and analysts reckon this could give it a leg up over the Aussie in 2016.

Australian government bond futures were mixed, with the three-year bond contract down 1 tick at 97.950. The 10-year contract added half a tick to 97.1200, while the 20-year contract was up one tick to 96.6200. (Editing by Sam Holmes)

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