The Australian dollar dropped to three-week lows on Thursday as players like hedge funds booked profits on long positions built in the past few months, while government bonds jumped on renewed safe-haven inflows.
At the local close, the dollar was at $US0.8991, down from yesterday’s close of $US0.9108 and nearly 3.5 cents below a 14-month high of $US0.9330 struck last week.
"More players are exiting long positions in the Aussie and it has been a pretty decent move down so I expect some consolidation here now," said Anthony Gray, head of risk solutions at Travelex. "We expect some support around the $US0.8930 levels, but a lot of it depends on how US growth numbers come in later tonight."
The US dollar, traded above the 76 mark against a basket of currencies, staying well above a 14-month low of 74.94. struck last week. Third-quarter US gross domestic product (GDP) will be released later on Thursday and analysts expect the US economy to expand at a 3.3 per cent annualised pace in the third quarter.
Anything lower could trigger another wave of selling in riskier assets and high-yielding currencies, much like the shock GDP numbers from the UK did last week.
Data this week from the US has raised questions about a sustained recovery, with consumer confidence dipping to recessionary levels and new home sales falling unexpectedly.
The Aussie dropped to 81.13 yen, from 82.90 yen late on Wednesday. The Aussie/yen has dropped from a 1-year high of 85.31 on October 23 as some of the leveraged carry trades funded in the Japanese currency were unwound.
The yen rose broadly, with its gains on the crosses more impressive as speculators unwound short yen positions.
But the Aussie jumped on the kiwi, rising to its highest in nearly three months at $NZ1.2515. The kiwi was slammed after RBNZ did not sound as hawkish about rates as many in the market had bet on.
Australian bond futures rallied on safe-haven inflows which gathered pace on fresh doubts about the pace of an economic recovery after poor US housing data.
Bonds also benefited from a paring in bets for a sharp rate rise in local rates next week. Three-year futures were 0.160 points higher at 94.81 while the 10-year contract was 0.085 points higher at 94.415. The curve steepened as the short end bonds rose at a faster pace than the longer dated securities.
Reuters