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Australian dollar soft on vaccine concerns, kiwi slightly firmer

Australian dollar soft on vaccine concerns, kiwi slightly firmer

· 02/07/2021 23:31
Australian dollar soft on vaccine concerns, kiwi slightly firmer

- The Australian and New Zealand dollars treaded water on Monday as positive market sentiment was blunted by disappointing reports about the efficacy of COVID-19 vaccines against new strains of the virus.

The Australian dollar AUD=D4 opened the week slightly lower on Monday but then climbed as much as 0.03%. By midday, the Aussie stood 0.02% lower at $0.7678 against the greenback.

Across the Tasman Sea, the kiwi dollar NZD=D3 too was trading sideways at $0.7199, or 0.08% firmer than its Friday close.

Optimism about a global economic recovery and a weak U.S. dollar had supported the risk-sensitive Aussie in Friday's session, but sketchy progress in fighting the coronavirus pandemic was spooking investors, traders said.

The weaker-than-expected U.S. non-farm payroll report on Friday fanned hopes that a $1.9 trillion COVID-19 aid package would be passed by U.S. lawmakers as soon as this month. That was also supportive of the Antipodean currencies, analysts said.

However, "near term gains should be capped given very concerning weekend news about the efficacy of vaccines on the 'South African' strain," Westpac analysts said in a note.

Australia's economy performed better than expected over the past year, but very significant monetary support would still be needed for some time yet, the Reserve Bank of Australia (RBA) said last week when it extended its quantitative easing programme. nL1N2K8083

The central bank left its cash rate at a record low 0.1%, but surprised by extending its bond-buying scheme by another A$100 billion ($76.01 billion) from mid-April.

Australia's three-year bond yields AU3YT=RR at 0.12% remain pinned near the RBA's target of 0.10% while 10-year bond yields AU10YT=RR edged up to 1.26%, the highest since March.




(Reporting by Paulina Duran in Sydney; Editing by Jacqueline Wong)

((paulina.duran@thomsonreuters.com; +61 2 9171 7406; Reuters Messaging: paulina.duran.thomsonreuters.com@reuters.net))