The Australian and New Zealand dollars weakened against the greenback on Monday, as investors became cautious and cut down on risk amid worries about increasing coronavirus restrictions in Asia and rising U.S. inflation.
The Australian dollar was down 0.31% to $0.7755 AUD=D3 , as investors took shelter in its U.S. counterpart amidst lower commodity prices and virus outbreaks in Singapore and Taiwan - where COVID-19 had been contained and both of which placed new curbs on economic activity and movement of people.
The risk-sensitive Aussie has support at $0.7720, although it broke the level on Friday. Resistance sits at about $0.7786.
The kiwi shed 0.47% to $0.7216 NZD=D3 after closing last week 0.41% lower at $0.7250. It has support at $0.7199 and faces resistance near the $0.7250 level.
Both currencies have also been hit by risk aversion in recent days after a startlingly strong reading for U.S. inflation sparked speculation the Federal Reserve might have to start tapering earlier than thought.
"Local economic data will be more important for AUD this week," said Commonwealth Bank currency strategists, adding the Aussie could reverse some of the losses if wages and employment numbers due later this week surprise on the upside.
Furthermore, the bank expects the U.S. dollar to resume its downtrend this week now that the market has digested last week's high inflation reading for April and as the U.S. Federal Reserve keeps rates low.
"The US economy has problems like labour market slack. High inflation is not a problem," they said.
Australian 10-year government bond yields AU10YT=RR were three basis points lower at 1.706%, while bond futures of the same maturity YTCc1 rose three ticks to 98.295, implying a yield of 1.705%. The three-year bond contract YTTc1 was half a tick higher at 99.750.
New Zealand government bonds
0#NZTSY= were slightly higher, sending yields up to one basis points lower across the curve.
