Australian dollar falls after COVID - 19 outbreak hits one-month low

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Kiwi hit by first community COVID - 19 case since February.

TOKYO - Aug. 17 - The Australian dollar tumbled on Tuesday after the country found its first community case of COVID -19 in six months while the New Zealand dollar fell to a one-month low as minutes from the central bank meeting were perceived as dovish.

Safe-haven currencies such as the yen were holding firm against riskier currencies also under growing anxiety the spreading Delta variant of the coronavirus could disrupt, if not derail, global economic recovery from the pandemic.

The New Zealand dollar fell 0.7% to $0.6972 after the virus-free country found a community outbreak of COVID - 19 for the first time since February.

The news came a day before the country's central bank, the Reserve Bank of New Zealand is widely expected to become first among developed countries to raise interest rates since the pandemic as its economy boomed.

While analysts still expect the RBNZ to go ahead with a 25 basis point rate hike on Wednesday, the currency's overnight Index exchanges included implied probabilities of a rate hike falling below 90% from more than 100% priced in before the news.

The Australian dollar lost $0.4 to $0.7308 after the minutes of the last Australian central bank policy meeting were perceived more dovish than some had anticipated.

The minutes showed the Reserve Bank of Australia which surprised markets by sticking to its plan to start tapering bond buying, would be prepared to take action should coronavirus lockdowns across the country threaten a deeper economic setback.

The minutes seem to fit with what Governor Lowe said earlier, but possibly markets reacting to headlines like the outlook is highly uncertain, said Teppei Ino, senior currency analyst at MUFG Bank.

Risk-averse sentiment was also growing as the weak economic data from the United States and China over the last few days have stoked fears the spread of Delta variant could lead to a slower global recovery.

The New York Federal Reserve's barometer of manufacturing business activity, released on Monday, declined more than expected in August, while the University of Michigan's survey on Friday showed U.S. consumer sentiment dropped sharply in early August to its lowest level in 10 years.

Data published on Monday in China showed July retail sales, Industrial Production and Fixed Asset Investments were all weaker than expected owing to the latest COVID - 19 outbreak which weighed on the world's second biggest economy.

Soft U.S. data could prove transitory but at the moment more people are turning cautious and consequently likely to reduce risk in their positions, rather than taking on more risks, said Kazushige Kaida, head of FX sales at State Street Bank's Tokyo branch.

As investors tried to reduce risk, so-called safe haven currencies, such as the yen and Swiss franc gained a boost.

The yen has advanced to 109.28 Yen per dollar and holds on to gains of about 1% made over the past two sessions until Monday.

Against the euro, the yen stood at 128.62 per euro while hitting a four-month high of 128.50 yen on Monday.

The Swiss franc benefited from the latest gains of 0.9133 franc per dollar. On the euro, it stood at 1.0745 Franc to the euro, going nearby its nine months high of 1.0720 set earlier this month.

The U.S. dollar, which was also often hailed as the ultimate safe-haven currency, held against many other rivals, including the Euro and most other currencies.

The euro settled to $1.1785, losing steam after hitting a one-week high of $1.18045 on Friday.

In Bitcoin, bitcoin traded for $46,449, not far from Friday's high of $38,190 in three months. Ether stood at $3,195.