Australia dollar at 1-week low, NZ dollar falls on dairy auction

[SYDNEY] The Australian dollar fell for a third straight session to a one-week trough on Wednesday as oil prices tumbled, while its New Zealand counterpart weakened after a disappointing dairy auction.

The Australian dollar slipped 0.2 per cent to US$0.7563, a level not seen since June 14. It last traded at US$0.7571. The Aussie has failed repeatedly to sustain a breach of chart resistance above US$0.7630 after touching a 10-week high of US$0.7636 last week.

"The Aussie dollar is looking vulnerable this morning due to the combined impact of the collapse in oil prices and the drop in US markets," said Greg McKenna, chief market strategist at AxiTrader.

Technical analysts say the Aussie may slip to US$0.7515/20 if it fails at current levels. It is up 5.2 per cent so far this year, putting it among the best performing major currencies.

Oil fell about 2 per cent on Tuesday, with Brent settling at seven-month lows, led by increased supply from several key producers.

The New Zealand dollar edged down to US$0.7232 from US$0.7268, drifting away from four-month highs of US$0.7320 touched last week.

Prices for milk products, the country's largest goods export, fell 0.8 per cent despite market expectations of a gain.

The next big event for the currency is the Reserve Bank of New Zealand (RBNZ) rate decision on Thursday, in which the central bank is all but certain to keep rates on hold.

Some analysts suspect the RBNZ will protest the strength of the local currency.

The New Zealand dollar "is expected to remain fairly stable ahead of tomorrow's RBNZ announcement," said Con Williams, ANZ economist, in a research note.

"Given the recent strength, the NZD is likely to be a focal point for the RBNZ tomorrow morning."

New Zealand government bonds gained, sending yields one basis point lower along the curve.

Australian government bond futures rose, with the three-year bond contract up one tick at 98.170. The 10-year contract edged 1.5 ticks higher to 97.555.

REUTERS