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Australia, NZ dlrs Play Defence as Bond Yields Fall Further

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SYDNEY, June 10 Reuters The Australian and New Zealand dollars were testing support on Thursday as sharp falls in bond yields undermined their rate advantage ahead of U.S. inflation data that just might lift the U.S. dollar out of its recent range.

The Aussie was pinned at 0.7732, after running into resistance at 0.7765 overnight. A break of support at 0.7724 would risk a return to last weeks lows around 0.7650.

The kiwi dollar eased to 0.7178, and further away from a 0.7242 top early in the week. It has support at 0.7155 and a major chart bulwark around 0.7125.

Markets are counting down to the U.S. consumer price report later in the session where a high reading could rekindle concerns about an early policy tapering from the Federal Reserve and boost the U.S. dollar.

The risk is all the greater as investors seemed to be wagering on a benign outcome with 10year Treasury yields dropping to a onemonth low overnight.

Local bonds performed even better as Australian 10year yields fell to their lowest in four months at 1.458, a drop of 18 basis points for the week.

That was the sharpest weekly fall since June last year and took yields 2 basis points below their U.S. counterpart, the first negative spread since March.

The bond rally has been helped by the dogged dovishness of the Reserve Bank of Australia RBA which continues to stress that inflation is unlikely to reach its target until 2024, making a rate hike a distant prospect.

David Plank, head of Australian…

USD Stuck near 5Month Low, Caution Reigns ahead of U.S. CPI

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