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Australia, New Zealand dollars at multi-week lows, bond yields jump

Reuters logo Reuters 9/03/2017

Australian dollar denominations shown in a photo illustration at a currency exchange in Sydney © REUTERS/Jason Reed/File Photo Australian dollar denominations shown in a photo illustration at a currency exchange in Sydney The Australian and New Zealand dollars stood at multi-week lows on Thursday as the greenback strengthened after robust U.S. jobs data cemented the chance of a Federal Reserve rate hike.

The Australian dollar (AUD=D4) held at $0.7515, its lowest since Jan. 27. After gaining in the first two months of the year, the Aussie has fallen 1.7 percent so far in March, largely due to a resurgent U.S. dollar.

The New Zealand dollar (NZD=D4) clocked its seventh straight day of decline to near a two-month low of $0.6907. It is down about 4 percent this month, compared with the U.S. dollar's 1 percent rise against a basket of global currencies (.DXY).

Wednesday's ADP data showed U.S. private payrolls grew by 298,000 jobs last month, the largest increase since December 2015. The gain was well above economists' expectations for a 190,000 increase.

The solid report made it almost certain the U.S. Fed will hike rates at its March 14-15 meeting, and increased the likelihood of more rate rises during the year.

The antipodean currencies were also hit by falling commodity prices, including gold and oil.

For the Kiwi, weak prices for the country's top commodity - milk - at the latest dairy auction and a run of soft economic data during the week spurred its downward momentum.

"It does appear that the typical negative correlation between the U.S. dollar and commodity prices ... is reasserting," said Ray Attrill, head of FX strategy at NAB.

"This in turn means that commodity-linked currencies are flipping from outperformers on the crosses in late 2016 to underperformers now."

With a Fed hike almost fully priced in for next week, Australian government bond yields rose to their highest since late 2015. Yields on the 10-year bond (AU10YT=RR) were up at 2.925 percent, well above the official cash rate of 1.50 percent.

The three-year bond future (YTTc1) slipped 4 ticks to 97.84, while the 10-year contract (YTCc1) lost 5.5 ticks to 97.0500.

New Zealand government bonds (0#NZTSY=) also fell, sending yields four basis points higher.

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