The Australian and New Zealand dollars tumbled on Friday as Israel’s strike on Iran hammered global stocks and drove investors into safe-haven assets, with domestic bond yields diving to over a month lows.
The commodity-sensitive currencies often track global risk sentiment and tend to take a hit when equity markets slide.
The Aussie plunged 0.9% to $0.6474, having risen 0.5% overnight to as high as $0.6534. It was already showing signs of fatigue as the currency has been unable to break a key resistance level of $0.6550 overnight even as the greenback slid due to another round of soft data.
For the week, it is down 0.3%.
The kiwi dollar dropped 1% to $0.6011. It gained gaining 0.7% overnight, hitting a high of $0.6071. Support comes in around $0.5990, while resistance is at the multi-month top of $0.6080. For the week, it is down 0.1%.
Israel said early on Friday that it struck Iran. Oil prices jumped over 6%, Wall Street futures dropped over 1%, while safe-haven currencies like the Japanese yen and Swiss franc rose.
Local bonds also rallied. Australia’s ten-year government bond yields slid 11 basis points to 4.133%, the lowest since May 1, while New Zealand’s ten-year government bond yields dived 8 bps to a six-week low of 4.529%.
Sean Callow, a senior analyst at ITC Markets, said the trend for the Aussie is still up given the pressure on the US dollar from a sluggish US economy and investor unease over the U. policy outlook.
“Investors are likely to expect that Israel’s strikes will be contained to a relatively short period, not something that will dictate market direction multi-week,” he said.
Also, Japan’s Nikkei share average fell on Friday, mirroring moves in US stock futures, oil and other stock markets on news that Israel had conducted a military strike on Iran.
As of 0106 GMT, the Nikkei was down 1.5% at 37,584.47.
The broader Topix fell 1.28% to 2,7473.9.
“The market was selling stocks on caution for geopolitical risks, but the news was not driving a fire sale because investors still wanted to monitor the development of the attacks,” said Naoki Fujiwara, a senior fund manager at Shinkin Asset Management.
Chip-making equipment maker Tokyo Electron fell 5.5% to drag the Nikkei the most. Uniqlo-brand owner Fast Retailing lost 2.1%.
Exporters fell as the yen strengthened, with Toyota Motor and Nissan Motor falling 2.75% and 1.5%, respectively.
All but three of the Tokyo Stock Exchange’s 33 industry sub-indexes fell.
Energy sectors rose as oil prices jumped, with oil explorers and refiners gaining 3.6% and 2.2%, respectively.
The utility sector rose 0.7%.
