Wednesday, 19 December 2012 11:19
WELLINGTON/SYDNEY: The Australian and New Zealand dollars lost some ground against the euro and US dollar on Wednesday, but held near multi-year peaks against the yen on expectations the Bank of Japan will ease policy aggressively later this week.
The euro climbed to two-month highs of A$1.2602 and two-week peaks of NZ$1.5800 on tentative signs of progress in the US fiscal talks.
"There is a lot of optimism about Europe with Greece getting a six-notch ratings upgrade and about the US fiscal cliff," said Joseph Capurso, a strategist at Commonwealth Bank of Australia.
Rating agency Standard & Poor's raised Greece's sovereign rating to B-minus from selective default, citing its European partners' efforts to keep the country part of the euro.
The euro has now rallied 1 percent against the Aussie this week, having pierced the 61.8 percent retracement of the Oct-Nov move at A$1.2568.
Capurso sees room for further gains with the euro likely to head to A$1.2750-A$1.2800, supported also by the European Central Bank which, he believed, is unlikely to cut interest rates.
For now, major resistance is found at the Oct 23 peak of A$1.2673. Bids are cited at A$1.2500.
Euro strength also weighed on the Antipodeans against the US dollar with the Aussie edging to $1.0518 from $1.0535 early. It was still fairly close to a three-month peak of $1.0585 hit last week.
Support was found at $1.0505, a trendline and a double-bottom, and a break below would target a move towards $1.0460/65. Resistance is seen at $1.0580.
The New Zealand dollar slipped around 0.3 percent on the day to a session low of $0.8378, retreating further from a 15-month high of $0.8477 hit last week.
The kiwi brushed off data showing a slight narrowing in New Zealand's current account, as it did little to change the market's view that third-quarter GDP data due on Thursday will show 0.4 percent economic growth, according to a Reuters poll.
The kiwi's broad rally since the start of the month has sputtered, prompting speculative accounts to trim long bets.
Market participants said this position squaring would weigh on the kiwi into the end of the year and a weaker-than-expected GDP reading could spark selling towards $0.8200.
"Until recently, we traded the $0.8100-$0.8350 range for the past three months, and maybe we'll head back into that range to close the year," BNZ currency strategist Mike Jones said.
But the Antipodeans kept their edge on the yen, with the Aussie at 88.62 yen, near a 19-month high of 89.01 set on Monday. The kiwi last changed hands at 70.70, not far off a four-year peak of 71.36 set at the start of the week.
The yen has come under heavy pressure this week with markets now positioned for the Bank of Japan to ease aggressively on Thursday.
New Zealand government bonds were a touch lower, nudging yields 0.5 basis points higher across the curve.
Australian government bond futures edged lower, with the three-year bond contract down 0.02 points at 97.200. The 10-year contract remained stuck at four-month lows of 96.610, getting close to the August trough of 96.560.
Center>Copyright Reuters, 2012