The Australian and New Zealand dollars slipped towards recent 30-month lows on Thursday as resoundingly upbeat U.S. economic data pushed Treasury yields to near-decade highs and sent the greenback soaring.
The Australian dollar AUD=D4 went as deep as $0.7093 to within striking distance of a more than 2-1/2 year trough of $0.7085 set last month.
The Aussie was last at $0.7100, paring some of its losses after official data showed a stronger-than-expected A$1.6 billion trade surplus for August.
The New Zealand dollar NZD=D4 fell to $0.6493, a level not seen since February 2016. It has already lost 8.4 percent so far this year.
"The Aussie and the kiwi are expected to remain under pressure today with breaks into new ranges possibly stretching the move even further," Nick Twidale, Sydney-based analyst at Rakuten Securities Australia, said in a note.
The U.S. dollar took off after an influential survey of the U.S. services sector showed activity at its strongest since August 1997, sparking speculation the payrolls report on Friday could also surprise.
In response, two-year Treasury yields hit decade highs of 2.88 percent while the 10-year jumped to a seven-year top of 3.18 percent.
Global yields followed Treasuries higher. New Zealand government bonds
0#NZTSY= fell, sending yields about 4 basis points higher at the long-end of the curve and 2 basis points at the short-end.Australian government bond futures slipped too, with the three-year bond contract YTTc1 down 4.5 ticks at 97.90. The 10-year contract YTCc1 declined 7 ticks to 97.27.
Surging Treasury yields and a rising dollar have pressured emerging market and Asian currencies in recent months. The Aussie, often played as a proxy for emerging market and China growth, has also been weighed by a resurgent greenback, tumbling more than 9 percent so far this year.
"Later tonight, U.S. factory orders remain another key risk for the AUD. Tomorrow, the all-important US non-farm payrolls will likely be the most market-moving event of the week," said Steven Dooley, currency strategist at Western Union Business Solutions.
A U.S. Federal Reserve hike in December is now put at an 8 in 10 chance, while investors lifted expectations for how high rates may eventually go.
