Aussie & NZ$ off on Spain, bank downgrades; China eyed

SYDNEY/WELLINGTON: The Australian and New Zealand dollars eased modestly on Friday after a cascade of ratings actions on Spain and various global banks, though they remain sharply higher for the week ahead of China inflation figures.

Aussie softer at $1.0155, from $1.0198 in New York, off a three-week peak of $1.0235 struck on Thursday.

The Aussie was still up 4 percent so far this week and on track for the biggest weekly rally since July 2010. It dropped to a 13-month low of $0.9388 just last Tuesday.

Hourly resistance at $1.0215 ahead of a major barrier at $1.0235/40, the 61.8 percent retracement of the $1.0765 to $0.9388 move, and 50 percent of the $1.1081 to $0.9388 drop. A break above that would target $1.0290, the 55-day MA. Support is found around $1.0106.

Immediate focus is on China's inflation data at around 0100 GMT, which is expected to show a slight dip to 6.1 pct in Sept, from 6.2 percent in Aug. A lower reading would likely be risk positive as it would widen scope for policy easing to support growth.

It pared some of its earlier losses following Singapore's decision to ease policy slightly to boost growth. Aussie is very sensitive to Asian currencies moves as it is viewed as a proxy for the region's FX.

Earlier, the Aussie knocked off around half a cent after S&P cut Spain to AA-minus. That came on top of a flurry of actions by Fitch, which cut UBS, Lloyd's Banking and Royal Bank of Scotland. It also placed Barclays Bank, BNP Paribas, Credit Suisse, Deutsche Bank and Societe Generale on watch negative.

NZ dollar eases to $0.7913, from $0.7959 in NY, not far from a three-week peak of $0.7996. Kiwi consolidating after failing to hold above 200-day moving average of $0.7960. Support seen around $0.7857, with attempts to assault $0.8000 possible.

Kiwi has had a solid run, up almost 7 pct since it hit a six-month trough of $0.7470 last week.

Aussie retreats to 78.08 yen from a near three-week high of 78.97 yen. Kiwi back to 60.88 yen from a three-week peak of 61.87 yen .

Aussie firm at NZ$1.2813, near a three-month high against the kiwi following upbeat jobs data earlier this week.

US Treasuries rose as some safety bids, pulling NZ government debt higher and sending local yields around 4 basis point down across the curve.

Australian debt follows, with three-year futures contract 0.07 point higher at 96.200 and the 10-year 0.045 points up to 95.555.