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Reuters Australia
Aussie dollar drops to 3-wk lows, but jumps on kiwi
Thursday October 29, 06:30 PM
* Aussie falls below 90 U.S. cents for first time in 3 weeks
* Speculators book profits in long Aussie positions
* Aussie/yen dives, but Aussie jumps to 3-mth high vs kiwi
SYDNEY, Oct 29 (Reuters) - 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.
"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 $0.8930 levels, but a lot of it depends on how U.S. growth numbers come in later tonight."
By evening the Aussie was at $0.8965, down from $0.9093 seen late here on Wednesday and nearly 4 cents below a 14-month high of $0.9330 struck last week. It fell to as low as $0.8942 which was its lowest since Oct. 8.
It received good support around $0.8940/50 levels where stop losses have been lined up, traders said.
The U.S. dollar, traded above the 76 mark against a basket of currencies .DXY =USD, staying well above a 14-month low of 74.94. struck last week.
Third-quarter U.S. gross domestic product (GDP) will be released later on Thursday and analysts expect the U.S. economy to expand 3.3 percent annualised in the third quarter [ECONUS].
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 U.S. has raised questions about a sustained recovery, with consumer confidence dipping to recessionary levels and new home sales falling unexpectedly.
The Aussie AUDJPY=R 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 Oct. 23 as some of the leveraged carry trades funded in the Japanese currency were unwound.
The yen JPY= rose broadly, with its gains on the crosses more impressive as speculators unwound short yen positions.
But the Aussie jumped on the kiwi, AUDNZD=R, rising to its highest in nearly three months at NZ$1.2515. The kiwi NZD=D4 was slammed after RBNZ did not sound as hawkish about rates as many in the market had bet on. [nSYD80874].
Australian bond futures rallied on safe-haven inflows which gathered pace on fresh doubts about the pace of an economic recovery after poor U.S. housing data. Bonds also benefited from a paring in bets for a sharp rate rise in local rates next week.
Three-year futures YTTc1 were 0.160 points higher at 94.81 while the 10-year contract YTCc1 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.
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