AUD, NZD Weaker, Investors Lured Away by Higher U.S. Yields

SYDNEY, Jan 11 Reuters The Australian and New Zealand dollars started the week with falls against the greenback on Monday, as the prospect of more stimulus for the words largest economy and the resulting higher yields drove investors to the U.S. currency.

The Aussie was last down 73 basis points at 0.7710 on Monday, the lowest since Jan. 5 and the second consecutive session of losses, following last weeks shift in the U.S. senate.

The USD was supported with increasing calls for stimulus driving relative yields higher, Australia and New Zealand Banking Group analysts said in a note.

Talk of more fiscal stimulus as Democrats took control of the Senate has pushed longerterm Treasury yields to 10month highs, giving the dollar a lift after weeks of losses.

Despite the recent falls for the Aussie, a liquid proxy for risk, its outlook remained positive as stimulus expectations and falling volatility support the risk trade, ANZ added.

Across the Tasman Sea, the New Zealand dollar was 57 basis points lower at 0.7197, also a weekly low.

In the bond market, price pressure by the selloff in U.S. Treasuries continued amid wagers that more stimulus spending would lead to more borrowing and higher inflation over time.

Australian 10year bond yields were at 1.09, leaving them 9 basis points higher than a week ago.

Yields on threeyear paper was little changed at 0.12, slightly higher than the Reserve Bank of Australias RBA target of 0.10.

New Zealand government bonds were…

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