SYDNEY/WELLINGTON: The Australian dollar stumbled on Wednesday as investors focused on the risk of yet lower interest rates domestically and ignored gains in global commodity prices.
The Aussie was down at $0.9653 in early trade, having been as low as $0.9611 at one stage after a retreat from $0.9734 late here on Tuesday.
Dealers noted all the major commodity currencies were hit, including the New Zealand and Canadian dollars, even as prices for most resources had a better session.
The New Zealand dollar slid almost 1 percent to $0.8020, after being as low as $0.7968. It was also pressured by a fall in global dairy prices, given that milk products are a major export earner for New Zealand.
Some blamed the Reserve Bank of Australia (RBA) for leaving the door open to another policy easing after it left rates unchanged at 2.75 percent on Tuesday.
The market is fully priced for another cut by October, while all the talk in the United States is about when the Federal Reserve might start to scale back its stimulus.
The diverging outlook for policy comes even as Australia's economy continues to outpace all its rich world peers. Figures on gross domestic product (GDP) due Wednesday are expected to show growth of 0.8 percent in the first quarter.
That would give year-on-year growth of 2.7 percent, compared to 1.8 percent in the US, 0.6 percent in the UK and contraction of 1 percent in the EU.
Losses against the US dollar kept the Antipodean currencies on the back foot against the yen and the euro. The Aussie traded around A$1.3550, near lows around A$1.3590 hit earlier this week, its weakest since late 2011.
The RBA may also loosen monetary policy further to reign in a stubbornly strong currency, which dampens competitiveness in the export sector. The RBA on Tuesday highlighted an elevated currency even as the Aussie has fallen sharply from around $1.0600 in April.
Aussie's failure to hold above $0.9777, the 23.6 percent retracement of it's April-May sell-off, suggests downside risks from a technical perspective.
Market participants see the next downside target at $0.9528, a trough hit last week for the first time since October 2011. A fall below that would open the door to $0.9400.
Kiwi sees support at $0.7937, an eight-month low hit last week, while its failure to push above $0.8111, the 23.6 percent of its April-May down move, will limit any upside. Traders say offers seen above $0.8100 will also cap gains. * Australian government bonds slip, with the three-year contract indicated down 0.020 points at 97.320, while the 10-year contract edges down 0.010 points to 96.550.
New Zealand government bonds slide in early trade, pushing yields 1.5 basis points higher across the curve.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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