WELLINGTON/SYDNEY: The Australian and New Zealand dollars slipped against the yen on Thursday after the Bank of Japan (BOJ) eased policy but failed to take the bold action the market was betting on to bolster a weak economy.
The Australian currency and bonds proved resilient, however, to news the Australian government had abandoned a pledge to return its budget to surplus by June next year.
The Aussie dropped as far as 87.87, from 88.42 early, after the BOJ expanded its asset purchase and lending programme scheme by 10 trillion yen as expected.
The move saw the yen edge up as traders unwound bearish positions that had been accumulated on speculation the central bank would take more radical measures, such as adopting a 2 percent inflation target.
"The markets had the idea the BOJ could have done more and obviously there was some disappointment, but the BOJ will do that next month anyway," said David Scutt, a trader at Arab Bank Australia.
The BOJ said it will review at its next policy meeting its present "goal" of achieving 1 percent inflation.
Later, the Aussie trimmed losses to last fetch 88.21 and was on track for a 12 percent gain this year. It touched a 19-month high of 89.01 on Monday.
The kiwi nudged lower to 70.28, having briefly fallen below 70. It climbed a four-year peak of 71.36 this week.
The New Zealand dollar was also pressured after weak domestic growth data raised concerns about the pace of the economy's recovery. It initially slipped to a 10-day low of $0.8330 when data showed gross domestic product rose 0.2 percent in the third quarter, versus forecasts for a 0.4 percent gain.
But it later recouped losses to trade around $0.8350, still not far from a 15-month high of $0.8477 hit last week.
Technical support was seen at $0.8315, the 38.2 percent retracement of its November-December rally, although a break of that could send the kiwi toward $0.8200. "Technical signals suggest a slide down to the late $0.8200 area, but the move we're seeing is just a bit of a retracement," Andrew May, a sales trader at CMC Markets.
"There's nothing to say we can't test $0.8450, or $0.8500 in the new year."
He expected higher-yielding currencies to resume their upward trend in 2013 if US politicians strike an agreement to avoid a "fiscal cliff".
The Aussie last changed hands at $1.0475, from $1.0484 early, pulling away from a three-month peak of $1.0585 hit last week. The Aussie has fallen nearly 1 percent this week.
Charts show some vulnerability with support at $1.0440, a double bottom from earlier in the month. A break would suggest a move under $1.0400. Resistance was initially seen at $1.0535, the previous session high.
The euro held onto solid gains on the Antipodean currencies, showing a jump of 1.3 percent against the Aussie and nearly 2 percent versus the kiwi this week.
It was last at A$1.2617, within striking distance of a two-month high of A$1.2681 hit on Wednesday. Major resistance was found at the Oct 23 peak of A$1.2673, with bids cited at A$1.2500.
Against the kiwi, it fetched NZ$1.5843, close to a two-week peak of NZ$1.5916.
New Zealand government bonds were mostly firmer, with yields as much as 1.5 basis points lower.
Australian government bond futures nudged up from four-month lows hit earlier this week. The three-year bond contract added 0.030 points to 97.250, while the 10-year contract rose 0.025 points to 96.655.
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