SYDNEY/WELLINGTON: The Australian and New Zealand dollars were pressured on Wednesday, as investors refocused on nagging worries about Spain's debt and the impact of recent US monetary stimulus.
But investor caution benefits government bonds which jumped to two-week highs. Three-year contract rose 0.05 points to 97.570 and a sustained break above key resistance of 97.600 would target 97.717, the 61.8 pct retracement of the June-August decline.
The 10-year contract leapt 0.075 points to 97.015, eyeing major resistance at 97.044, the 61.8 pct retracement of the June-August decline.
Likewise, New Zealand government bonds extend gains, sending yields as much as 6 basis points lower. The 10-year bond fell to 3.52 pct, its lowest since Sept. 6, not far from a trough of 3.43 pct touched early this month.
Aussie skids to a two-week low of $1.0353 from $1.0381 in early trade, a fair way below $1.0625 hit mid-month.
Last at $1.0374.
Support found at $1.0340, the convergence of the 200-day MA and the 61.8 pct of the $1.0165/$1.0625. A break below would target a retracement all the way to $1.0165, its weakest since July.
New Zealand dollar briefly touched a low of $0.8187, a whisker above Monday's two-week low, before edging up on fund buying to sit around $0.8195/00.
Kiwi having trouble re-establishing above the $0.8200 level suggesting risks to the downside. Near-term support seen at the week's low of $0.8184, ahead of the 20-day MA of $0.8145, while $0.8235 likely to cap the topside.
Spain on investor's watch this week as it prepares for a new round of unpopular austerity measures in the 2013 budget. Markets waiting to see whether the Iberian nation will request a bailout which would activate the new bond buying programme from the European Central Bank. Such an event should be risk-positive.
Aussie and kiwi have been losing ground on signs of slowing growth in China, a key export market, and speculation that the Reserve Bank of Australia may cut interest rates next week.
Interbank futures show a 62 pct chance of a cut next week while more of the major Australian banks are now tipping an easing, including Westpac, ANZ and CBA.
Aussie, kiwi slip further against the safe-haven yen, and give back earlier modest gains against the euro.
New Zealand's Fonterra, the world's biggest dairy exporter, cuts its payout to farmers for the just finished season by 19 pct, as a glut of milk swamps global prices.
It manages to hold revenues steady on increased production. It makes no change to its lower price forecast for the current season.
New Zealand posts wider-than-expected trade deficit in August of NZ$789 million against the forecast NZ$606 million, widening the annual deficit.
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