By Swati Pandey
SYDNEY, March 9 (Reuters) - The Australian and New Zealand dollars touched 11-year lows on Monday as a slump in oil prices, coupled with coronavirus fears, drove investors to the safety of bonds, driving yields to unseen levels.
The commodity-linked Australian dollar AUD=D4 was last down 1.4% at $0.6547 after falling as much as $0.6311, a level not seen since early 2009.
Panic-stricken investors rushed to the safety of bonds as oil prices collapsed 30% after Saudi Arabia stunned markets with a pledge to slash prices and boost production following the collapse of an OPEC supply agreement. MTKS/GLOB
At one point, the Aussie AUDJPY= was down 6% against the safe-haven yen, while the Kiwi NZDJPY= plunged more than 7%.
The Aussie has been under pressure since mid-January as more coronavirus cases emerged in China, Australia's No.1 trading partner. A rate cut last week by the Reserve Bank of Australia (RBA) to a record low of 0.5% further sent the currency spiralling lower. has seen a worrying increase in coronavirus cases in the past couple of days, though the majority were travellers who caught the virus abroad, with only one instance of community transmission. Australian government is set to unveil a fiscal stimulus package this week in a bid to stave off recession.
While details of the measures are still being finalised, media reported that the planned A$10 billion stimulus would include wage subsidies and cash injections for businesses.
In addition, economists are widely expecting another rate cut from the RBA to 0.25% next month followed by unconventional monetary policy.
National Australia Bank (NAB) is "now forecasting that the RBA will adopt unconventional policy by May or June to help the economy deal with the fall-out from the coronavirus outbreak," the economists said in a note.
"NAB expects the RBA to implement yield curve control," they said, referring to a form of quantitative easing, where the central bank sets target levels for government bond yields and buys bonds if yields fail to settle at the targets.
Yields on Australian three-year bonds AU3YT=RR hit an all-time low of 33 basis points, while those on 10-year paper AU10YT=RR went as deep as 55 basis points.
The New Zealand dollar NZD=D4 was last down 1.4% at $0.6272 after earlier hitting an 11-year trough of $0.6008.
There have been five confirmed cases of coronavirus in New Zealand so far. The government on Monday extended its restriction on travellers from China and Iran by another seven days.
Reserve Bank of New Zealand Governor will give a speech on Tuesday about how the bank would assess and use unconventional monetary policy tools if needed. is set to make its next interest rate decision on March 25. (Editing by Anil D'Silva)