Aussie & NZ dollar drift lower on stocks, US budget deadlock

WELLINGTON/SYDNEY: The Australian and New Zealand dollars drifted lower on Monday, with markets remaining wary of European debt woes as the United States also struggled to work out a budget deal.

The Aussie hits a fresh six-week low at $0.9950, from $1.0013 in New York on Friday. Support at the base of Ichimoku cloud at $0.9932, then $0.9920, with $1.0015 as the next resistance.

Weak stocks across Asia and bearish comments from Chinese Vice Premier Wang Qishan warning that a lasting global recession is certain to happen weighed on the Aussie.

Rising worries on the US "super committee" stalemate in congress undermines risk appetite.

Aussie down 5.3 pct so far this month on fears the euro zone debt crisis could spiral out of control as the bond market turmoil spreads across Europe.

Perversely the euro itself was holding steady at $1.3520, having proved remarkably resilient to the region's debt troubles. Repatriation by European banks has played a part, and speculators are already heavily short of the currency and reluctant to sell further.

Instead, investors have chosen to sell other risk-linked assets as a proxy for the euro, and those include the Australian and New Zealand dollars.

Investors cautious, waiting for a policy response from ECB, EU and/or IMF.

NZ dollar wobbly, edging lower to $0.7545 from $0.7567 in New York on Friday, having fallen to a near seven-week low of $0.7549 offshore. It is 6.4 pct lower this month.

Kiwi seen supported around $0.7510, the lower Bollinger band, with resistance at $0.7650 and then $0.7695.

Markets pricing now implies a 26 pct risk of a rate cut in December, and 14 bps of cut over the next year -- a sharp turn from last month when the betting was for hikes.

The Antipodeans remain soft against the yen, with the Aussie holding around 76.67 yen, not far from a six-week low of 76.53 struck last week. Kiwi slips further, last at 57.93, lowest since Oct 4.

Construction data due in Australia this week, while NZ has migration and trade numbers. There are three speeches from the Reserve Bank of Australia, starting with Assistant Governor Debelle later on Monday.

NZ government bonds softer, sending yields up to 4 bps higher. Yields slid to record lows last week as the euro zone crisis caused a huge swing in expectations from rate hikes to rate cuts.

Aussie futures mixed with the curve steepening. The three-year debt contract up 0.01 points to 96.790, having scaled a fresh 2.5-yr high earlier in the session, while the 10-year contract 0.025 points lower to 95.960.