Wednesday September 10, 2014 - 00:05:08 GMT
Share This Story
Reuters - www.reuters.com
FOREX-Aussie dollar slumps to 5-month low as USD flexes muscle
* Carry trades hit by increased FX volatility, higher US yields
* Aussie suffers another big fall, EM currencies also hit
* Sterling & euro find a bit of reprieve for now
By Ian Chua
SYDNEY, Sept 10 (Reuters) - The Australian dollar nursed a second session of heavy losses early on Wednesday as investors unwound popular carry trades amid a pick-up in market volatility and further gains in U.S. Treasury yields.
Standing out from the other major currencies, the Aussie fell 0.9 percent on Tuesday, following on from Monday's 1.0 percent drop. It slid to its lowest in over five months at $0.9188, before edging back to $0.9210.
The Aussie's setback was sparked by a broad rally in the U.S. dollar. Investors seemed to be repricing the risk of an earlier U.S. interest rate hike after interpreting a Federal Reserve study as suggesting they were underestimating such a move.
"The approach of next week's FOMC meeting appears to be pushing markets to reconsider the relatively low policy risk premium still reflected in the front-end of the U.S. curve," noted analysts at BNP Paribas.
U.S. Treasury yields have moved up as a result with the two-year within sight of a three-year peak of 0.590 percent set in late July. The 10-year yield popped back above 2.50 percent, off a recent low of 2.30 percent.
The rally in yields helped the greenback hit a fresh six-year high just shy of 106.50 yen. It also firm against many emerging markets currencies.
The euro, though, managed to halt its slide against the greenback after slumping to a 14-month trough of $1.2859 in European trade on Tuesday. It last traded at $1.2935.
Sterling also saw a bit of a reprieve despite ongoing worries about Scottish independence. It steadied at $1.6105 , having carved out a fresh 10-month low of $1.6060.
That knocked the dollar index to 84.143 from a 14-month high of 84.519. But it is still within striking distance of its 2013 peak of 84.753, with a break there taking it to highs not seen since mid-2010.
Traders said the current theme of a firmer U.S. dollar is likely to dominate given an absence of market-moving data in Asia.
On Thursday, a policy review by New Zealand's central bank, employment data from Australia and China's inflation figures will take centre stage. (Editing by Richard Pullin)
© Thomson Reuters 2014. All rights reserved.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."