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Australia, NZ dlrs hit multi-month lows as safety rules

Published 14/01/2016, 12:54 pm
Australia, NZ dlrs hit multi-month lows as safety rules
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By Cecile Lefort and Charlotte Greenfield

SYDNEY/WELLINGTON, Jan 14 (Reuters) - The Australian and New Zealand dollars slid to multi-month lows on Thursday as a vicious selloff in commodities and equities revived worries about global growth.

The Australian dollar AUD=D4 dropped to $0.6920, its weakest since September and a break below $0.6892 will take it to lows not seen since early 2009.

The Aussie has skidded nearly 5 percent this year on worries that China could be losing its grip on managing the slowdown of its economy.

Not helping risk sentiment were sharp falls in commodities and equities. Bourses in Australia, Korea and Shanghai shaved off 2 percent and Japan shed almost 4 percent. Prices of iron ore, Australia's top export earner, are down 8 percent so far this year.

Such was the mood that even a robust jobs report at home left the market unimpressed.

"On balance the numbers were pretty solid. The relief today is that we didn't get a big unwind of the gains we've seen in the last two months," said Stephen Walters, chief economist at JPMorgan (N:JPM).

He said the Aussie's push below 70 cents would be welcomed by the Reserve Bank of Australia.

"The Reserve Bank is probably pretty content to let the currency work for them rather than lowering interest rates."

Interbank futures 0#YIB: imply an around 50-50 chance of a another cut in interest rates by April.

Across the Tasman Sea, the New Zealand dollar NZD=D4 was down 0.5 percent at $0.6483 as markets remained risk-averse. It fell as far as $0.6468, its weakest since November and a break under $0.6430 would take it to three-month lows.

BNZ Senior Market Strategist Kymberly Martin said the kiwi came under some pressure after it broke through $0.6500 as that "is a bit of a psychological level."

Overall, she said, markets remained ultra-sensitive to what was happening in China and to how Asian equity markets fared.

New Zealand government bonds 0#NZTSY= joined the safe-haven rally, sending yields around 5 basis points lower.

Australian government bond futures hovered near multi-week peaks in a bullish flattening of the curve, with the three-year bond contract YTTc1 up 4 ticks at 98.060. The 10-year contract YTCc1 rose 7.5 ticks to 97.3150, while the 20-year contract YXXc1 gained 6.5 ticks to 96.8200.

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