TOKYO- The Australian and New Zealand dollars slumped on Wednesday as skepticism grew about top trading partner China’s stimulus, while the greenback hovered near two-month peaks versus major peers on wagers US interest rate cuts will be gradual.
New Zealand’s currency was weighed down further by data showing cooling inflation, keeping the door open for aggressive easing by the nation’s central bank.
The Aussie dropped as much as 0.51 percent to $0.6669, the lowest since Sept. 12, before changing hands down 0.38 percent at $0.6678 as of 0133 GMT.
The New Zealand dollar sank as much as 0.69 percent to $0.6041, a level last seen on Aug. 19. It was last trading 0.53 percent weaker at $0.6051.
“There’s definitely been some building skepticism about China’s real commitment to the kind of fiscal support that would be seen as really cathartic,” and that is pulling down the Australian and New Zealand currencies this week, said Ray Attrill, head of FX strategy at National Australia Bank.
Chinese stocks fell sharply on Tuesday and continued to decline in the latest session, following a frenzied rally fueled by stimulus hopes that Beijing has yet to bring to fruition.
On Saturday, China’s finance ministry said it would increase borrowing, without saying when or by how much. China will hold a press conference on Thursday to discuss promoting the “steady and healthy” development of the property sector.
Meanwhile in New Zealand, “there’s been some speculation that the next RBNZ rate cut might be as much as 75 basis points,” Attrill said. “Today’s CPI numbers arguably played with the grain of that view for an outsized cut.”
Statistics New Zealand said on Wednesday that annual inflation dropped to 2.2 percent in the third quarter, returning to the RBNZ’s target range of 1 percent to 3 percent for the first time since March 2021.
