Commodity Currencies Correct Sharply Lower as Risk Aversion Returns

The Australian and New Zealand Dollars were among the biggest losers against the U.S. Dollar last week, after having gained considerably over the previous two weeks.
Down over -2.9% last week was the Australian Dollar, which had boldly traded over the psychological parity level for most of the previous week. The New Zealand Dollar, which gained +4.9% over the previous week, lost most of its gains by dropping -2.9% last week as the Greenback rose against all the major currencies.
The Canadian Dollar was the best overall performer among the commodity dollars, losing only -0.9% against the Greenback last week. The Loonie gained support from rising crude oil prices which topped $88 per barrel on Thursday, only to sell off sharply on Friday to end the week lower.

Australian Unemployment Jumps to 5.4 Percent

Besides risk aversion, the Aussie's decline was also attributed in part to some mixed Australian economic numbers released last week.
Perhaps the most significant of the economic numbers which affected the Aussie was an increase in the Australian Unemployment Rate that came out at 5.4% versus an expected 5.0%. The rate rose despite the Australian Employment Change showing a favorable increase of +29.7K versus the +20.2K that the market was expecting.
The employment number was significant in the wake of the RBA's November rate decision, which saw the RBA surprise the market and raise its benchmark Cash Rate to 4.75 percent earlier in the month.
Other economic numbers which adversely affected the Australian Dollar last week were the Westpac Consumer Sentiment Survey which came out at a dismal -5.3% versus a previous reading of an increase of +3.3%, and the NAB Business Confidence Survey coming out at 8 - the lowest the number has been in a year - versus a previous reading of 10.

Kiwi Gives Back Most of its Gains from Last Week

The Kiwi down move seen last week was partly corrective, although the large decline was due in part to risk aversion in the currency market resulting from the European debt situation that neutralized the otherwise favorable fundamentals for New Zealand that were released last week.
Furthermore, last Tuesday saw the RBNZ release its Financial Stability Report outlining the central banks implementing of the Basel III agreement and the creation of the Financial Markets Authority.
In his closing statement, RBNZ Governor Bollard wrote that,
"Non-performing loans and profitability have stabilized over recent months, as reflected by an unchanged rating for 'capital and profitability'. There have been ongoing improvements in the funding position of the New Zealand banking system, as indicated by material improvements in the core funding ratio. Nevertheless, funding markets remain somewhat fragile, as indicated by the 'funding and liquidity' dimension still sitting slightly above normal."