Australian dollar extends fall to 2-year low, defies strong retail data

(Corrects paragraph 6 to make clear offshore yuan hit low)

SYDNEY, Sept 28 (Reuters) - The Australian and New Zealand dollars extended their declines to fresh two-year lows on Wednesday as the safe-haven dollar received another boost from jittery traders amid continued selling of stocks and bonds.

The Aussie slid 0.6% to break through 64 cents and last traded at $0.6395 AUD=D3 , the lowest since May 2020. It failed to sustain a minor rally overnight and finished the session 0.4% lower. There does not appear to be any major support in sight.

That brought its losses against the U.S. dollar this year to a staggering 12%, although the Aussie was 1% higher against a basket of its major trading partners' currencies =AUD so far in 2022, reflecting the broad strength in the greenback.

The antipodean currency also failed to get any material support from better-than-expected retail sales data, which showed Australian shoppers were proving resilient to red-hot inflation and rising interest rates.

"With safe haven demand for the USD still intact, there are no signs of easing pressure on the AUD," said analysts at ANZ.

Adding to the downside, the offshore Chinese yuan hit a record low of 7.2 per dollar CNH= . Many investors use the Aussie as a proxy for the yuan given China is Australia's single biggest export market and a driver of commodity prices.

The kiwi shed 0.8% to $0.5585 NZD=D3 on Wednesday, sitting not too far from the March 2020 trough at $0.5469.

Australia's strong retail sales figures are likely to add to the case for a 50 basis-point rate hike from the Reserve Bank of Australia next week. Markets are leaning toward a half-point rise to 2.85% on Tuesday and see rates as high as 4.45% by the middle of next year. 0#RBAWATCH

Australian 10-year government bond yields AU10YT=RR have shot up by almost 50 basis points in the past five sessions to the highest since June. However, it still outperformed U.S. Treasuries with the yield spread narrowing to 15 bps.
Reporting by Stella Qiu; Editing by Ana Nicolaci da Costa

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