Aussie & NZ dollars trim heavy losses on G20, China

WELLINGTON/SYDNEY: The Australian and New Zealand dollars nursed heavy losses on Friday amid a global flight from risk, though they did edge up from multi-month lows on a pledge from the G20 to take action on the EU debt crisis and talk of China buying local stocks.

G20 finance officials say in a communique they are committed to preserve stability in banking system and provide liquidity, but stop shorts of details.

Still, that and a report about China's national pension fund planning to invest more than 10 bln yuan in local shares helped at the margin.

Aussie trims losses to $0.9783, having plunged around 3 percent to its lowest since early December overnight, as risky assets were dumped unceremoniously in favour of the safety of Treasuries, the US dollar and yen.

Aussie sank as deep as $0.9692, from a high of $1.0040 overnight. It was the biggest daily loss since May 2010 when similar fears about global growth gripped markets.

It has lost around 5 percent so far this week and breached major chart support at $0.9927. Next major support at $0.9692.

Asian stocks and commodities remained largely in the red.

NZ dollar pares losses, holding around $0.7814 after falling some 3 pct to a five-month low of $0.7752 earlier. It had been around $0.7970 late on Thursday.

Kiwi is down 5 percent this week and at levels last seen in May. Support initially at $0.7755 with $0.7951, a 200-day moving average, capping the upside.

Kiwi came under pressure on Thursday after the economy unexpectedly slowed in Q2, prompting markets to push back the expected start of rate hikes to April next year.

Latest NZ survey shows employee confidence down for the first time in a year in Q3, as workers became more pessimistic about the near-term economic outlook.

The Antipodeans take a hit on cross rates, with the kiwi hovering at a six-month trough against the yen, last at 59.54 yen . The Aussie dropped 3.2 pct to a 12-month low of 73.84 yen before lifting a shade to 74.66.

Aussie and kiwi also slide against the Swiss franc and the euro. On trade weighted basis against basket of currencies Aussie is down 1.4 percent and the kiwi 1.45 percent down.

NZ government bonds stay firm, with local yields 6 basis points lower. Two-year swap yields at record low level of 3.05 pct, after the weak GDP data.

S&P affirms Australia's top notch rating citing ample fiscal and monetary policy flexibility, economic resilience, and its sound financial sector.

Australia's central bank reiterates the nation's banking system is well placed to weather the current turmoil, though it cautions banks against taking on too much risk.

Australian bond futures extend recent rally with the three-year contract up 0.08 points at 96.570. The 10-year gained 0.085 to 95.980, having broken a 2009 peak of 95.990 earlier in the session.

Copyright Reuters, 2011