News: Australia, NZ dollars stumble as China worries hurt sentiment

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    The Australia and New Zealand dollars fell on Monday, as risk sentiment soured in Asia following disappointing Chinese economic data while fast-growing outbreaks of COVID-19 threaten Australia's largest cities with longer lockdowns.

    The Australian dollar was 0.52% lower at $0.7338 AUD=D3 as officials said the country's second-most populous city of Melbourne would be put under curfew and Sydney reported record locally transmitted infections of the Delta variant of the virus.

    That is closer to its lowest level in August of $0.7316, than it is to $0.7426, the month's highest. Immediate support lies around $0.7316 and resistance at $0.7381.

    "Risks are firmly skewed to the downside this week in our view," Commonwealth Bank analysts said. "The coronavirus situation continues to bear down on Australian interest rates and the Australian dollar."

    The kiwi dollar was also 0.18% lower at $0.7027 NZD=D3 . Data on Monday showing a sharp reduction in production, consumption and investment activity in China amid new COVID-19 outbreaks in the country are weighing on commodity prices and the antipodean currencies.

    But the kiwi, which has risen 0.75% this month, is likely to find support this week, with the Reserve Bank of New Zealand expected to raise interest rates at its policy review on Wednesday.

    Economists polled by Reuters expect the RBNZ to raise the official cash rate by 25 basis points from a record low to 0.50%, amid concerns pandemic-era stimulus is stoking inflation.

    In contrast, meeting minutes due to be released by the Reserve Bank of Australia on Tuesday are likely to confirm the central bank's dovish stance amid the worsening pandemic there.

    "A rate hike from New Zealand will see the Aussie dollar's attractiveness pale in comparison to its trans-Tasman cousin," said Steven Dooley, currency strategist at Western Union Business Solutions.

    The Australian dollar fell 0.37% against the kiwi to NZ$1.0445 AUDNZD= its lowest since December last year.

    "A move towards parity remains a clear possibility for the AUDNZD cross," Dooley added.

    Bond prices were higher on Monday, pushing the 10-year yield on Australian bonds AU10YT=RR 7 basis points lower to 1.146%, while yields on New Zealand bonds of the same maturity fell two basis points to 1.733%.

 
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