Aussie & NZ dollars higher, euro debt worries lurk

WELLINGTON/SYDNEY: The Aussie and New Zealand dollars were firmer on Tuesday as a bounce in the euro pressured the US dollar, although investors remained nervous about the European debt crisis and fears over a Greek default were rekindled.

* The Aussie sits at $1.0235, compared with $1.0168 in late local trade Monday. It ranged $1.0157 to $1.0258 overnight in generally lacklustre trading.

* First line of resistance for the Aussie seen around $1.0245/60 ahead of $1.0304 and then the two-month high of $1.0387 struck last week. Initial support at $1.0200, with key support seen at $1.0128, the Dec 30 low.

* The NZ dollar outperforms with a strong showing to rise to $0.7873, from Monday's late local level of $0.7793. It ranged $0.7800 to $0.7873 overnight and is in sight of last week's two-month peak of $0.7908. Near-term support seen at $0.7820 and below that $0.7760 with resistance at $0.7908.

* The euro gains 0.3 percent from a 16-month low against the dollar as participants pare short positions, but are still seen overwhelmingly bearish ahead of this week's events.

* A meeting between French and German leaders results in Greece being told it will get no more aid until it agrees to a debt swap with bank creditors. They insist that private-sector bondholders must share in reducing Greece's debt burden, while new European and International Monetary Fund lending was also needed.

* Investors still sceptical that European politicians will deliver an effective plan to resolve the region's debt crisis, and cautious ahead of this week's first Italian and Spanish bond auctions of the year.

* The euro a hint softer against the Aussie at A$1.2455 against A$1.2482 on Monday. The euro previously had eight straight sessions of lower lows and lower highs, touching an all-time low of A$1.2408 on Friday.

* The strength of the kiwi sees the euro hit an all time-low of NZ$1.6174 against Monday's NZ$1.6270. It last trades around NZ$1.6190.

* Against the safe-haven yen, Aussie 0.4 percent higher at 78.70, but kiwi romps ahead more than 1 percent to 60.54.

* Disappointingly Australian flat retail sales data adds fuel for a further rate cut next month by the central bank, which has already eased rates by 50 basis points late last year due to the European debt crisis.

* Interbank futures imply an 84 percent chance of a cut at the RBA's next meeting on Feb. 7 and foreshadow a total of 89.5 bps in cuts by mid-year.

* The soft Australian data and prospect of further rate cuts sees kiwi make solid gains against the Aussie with the cross rate falling 0.7 percent to NZ$1.3000, a two-month low.

* Building data set for release in Australia and New Zealand. Recent data in both countries has been lumpy with wild swings from month to month.

* New Zealand government bonds flat as US Treasuries rise on steady stock market and renewed worries about Greece and eurozone debt.

* Australian bond futures weak, with the 3-year contract 0.02 points lower at 96.870 and the 10-year contract down 0.015 at 96.185.