WELLINGTON/SYDNEY: The Australian and New Zealand dollars briefly dipped on Wednesday, before regaining steam after positive World Bank comments on the economic outlook for China. Gains were limited, however, by euro zone worries and weak Japanese stocks.
The Aussie consolidated at around A$1.0103 after testing a session low of $1.0065 on profit taking by local firms. It kicked higher after a World Bank economist predicted China would become the world's biggest economy by 2030, buoyed by 8 percent GDP growth over the next 20 years.
The Australian dollar is very sensitive to any news from China, its key export market.
The local currency has made a stunning turnaround from last week when it plunged to a four-month lows around $0.9705 with traders expecting further gains in the short-term.
"Given everything that was thrown over in the past week and a half and the fact that it only went down to 97 cents region, it's quite an ominous sign for everyone who's going to try to short it that it's heading higher... perhaps to $1.0300," said David Scutt, a trader at Arab Bank Australia.
"It seems to have that momentum."
The Aussie struck a 28-year high of around $1.0257 on December 31.
Support is now seen at $1.0025 against resistance at $1.0129.
The New Zealand dollar edged higher to $0.7414, dragged up by the Aussie and is well above last week's trough around $0.7115. It hit a near two-week high of $0.7448 in offshore trade. Support is seen at $0.7339 with $0.7457 the first line of resistance.
The kiwi received a brief knock after data showed the fourth-quarter current account deficit widened slightly, although a short term improvement is seen on insurance payments after the devastating Christchurch earthquake of Feb. 22.
The local currency also found some support as dairy giant Fonterra, New Zealand's largest company, confirmed its forecast of a record payout to farmer shareholders in the current year, on the back of soaring food prices.
However, gains made by the Antipodean currencies, were capped by weak Japanese stocks and renewed worries about euro zone debt problems.
The Portuguese government's austerity plan faces a make-or-break test in the parliament later on Wednesday, which, if rejected, might lead to the possible collapse of the minority government.
Continued fighting in Libya, spreading unrest in the Middle East and fears of radiation in Japan also limited the upside for the Aussie and kiwi.
That said, lingering expectations of further intervention to dampen the yen would support commodity currencies, in part because it would encourage investors to use the yen as a funding currency for carry trades.
For now, the Aussie and kiwi are holding onto gains against the Japanese currency at 81.73 yen , well recovered from last week's lows around 75.00, and at 59.99 yen , well off last week's near one-year trough of 54.98 yen.
In New Zealand, focus is now on fourth quarter growth figures due on Thursday, with the economy expected to be close to stalling. A negative reading will mean the country slipped back into recession at the end of 2010.
NZ government bond yields were steady while interest rate futures trimmed earlier losses.
Australian bond futures fell a touch with the three-year contract at 95.000, off 0.01 points and 10-year contract off 0.002 point at 94.550.
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