WELLINGTON/SYDNEY: The Australian and New Zealand dollars slipped on Tuesday as European debt worries dominated, with markets questioning the region's ability to push through painful reforms to avoid a global financial meltdown.
The Australian dollar dipped to $1.0170, well below Monday's high of $1.0345, having lost momentum as new governments in Italy and Greece failed to ease fears about the euro zone debt crisis.
"It's a combination of traders fatigue with headline trading," said Nick Socratous, head of global foreign exchange at HSBC Australia.
"Italy and Greece may have changed Prime Ministers, but their debt problems are long term and markets continue to trade on a risk-on, risk-off paradigm."
The Aussie briefly touched a session high of $1.0227 after minutes of the Reserve Bank of Australia's (RBA) November policy meeting suggested a rate cut had been a close call.
In the end, the Reserve Bank decided to deliver a modest cut due to benign inflation at home and mounting economic risks from Europe. It eased by 25 bps to 4.5 percent on Nov. 1, the first cut in more than two years.
The central bank gave no hints on whether it may ease again, though markets remained priced for several rate cuts in the months ahead. Interbank futures imply around a 64 percent chance of a cut to 4.25 percent in December and a total easing of 87.5 bps by March.
For now, immediate support is found at $1.0183 with first line of resistance at $1.0230, the 38.2 percent of Monday's range.
The Australian dollar surged to a five-month peak of NZ$1.3169 on the kiwi before steadying at around $1.3152. Buying from real money accounts squeezed shorts and triggered stops above $1.3150, according to a trader.
A clear break at $1.3150 targets the 61.8 percent retracement of this year's range at $1.3225.
NEW ZEALAND DOLLAR
The New Zealand dollar softened to $0.7735 in late trade, from $0.7789 late in New York, having briefly touched a session high $0.7810.
The kiwi was seen supported at $0.7730 in the near term, with the top side contained around $0.7830 and then $0.7860.
Imre Speizer, a senior strategist at Westpac, kept his bearish kiwi view and would look for bounces to sell into.
"Weakness in food commodity prices and increased signs of (bank) credit tightening in Asia are likely to add to the list of negatives for the kiwi," Speizer said.
The Antipodeans were weaker on the safe-haven yen, with the kiwi now sitting close to one-month low around 59.77 yen . The Aussie was last at 78.68 yen, off Monday's high of around 80 yen.
The New Zealand government bond prices extended gains on safety demand, with yields as much as 16 basis points lower.
Australian debt futures jumped, with the three-year debt contract up 0.11 points at 96.580, while the 10-year added 0.12 points to 95.885.
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