WELLINGTON/SYDNEY: The Australian and New Zealand dollars nursed heavy losses on Tuesday, while bonds rallied as deepening concerns over stalled US fiscal talks and the euro zone's endless woes led investors to dump stocks and commodities.
New Zealand two-year government bond yield falls to a record low at 2.418 pct, while the equivalent Australian yield at 3.118 pct is not far off a three-year trough of 3.072 pct plumbed Monday.
Aussie three- and 10-year debt futures both firmer, reaching near three-year peaks at 96.930 and 96.055 respectively.
Aussie dollar at $0.9852, hovering above a six-week trough of $0.9809 set overnight. It looks set to test the early October low of $0.9728, while capped on the top side around $0.9930.
Aussie now down about 6.5 percent this month on fears the euro zone debt crisis could spiral out of control.
Moody's warned France that a sustained rise in its debt yields coupled with weakening economic growth could harm its ratings outlook.
The US dollar benefits from the safe-haven status of Treasuries even though it is the US government's failure to deal with its debt problems that is adding to the global uncertainty.
Instead, traders are selling growth-leveraged assets such as the Antipodeans as a proxy for the troubles in Europe and the US, ignoring the countries' relatively sound fundamentals.
After months of talks, US lawmakers have abandoned their high-profile effort to rein in the country's ballooning debt
The Antipodeans somewhat steadier against yen and euro, having posted big losses overnight.
NZ dollar at $0.7481, after dropping as much as 1.5 pct to an eight-month low of $0.7449 overnight. Kiwi vulnerable if the $0.7437 support is broken.
Kiwi also not helped by losing more people to Australia, with latest data pointing to first annual migration loss in 10 years in October. Prolonged losses will dent domestic demand.
Markets also await an inflation survey done for the Reserve Bank of NZ around 0200 GMT. Inflation pressures have eased recently, with further declines expected as the impact from last year's sales tax increase diminishes.
Bleak global outlook and cooling price pressures have seen markets pushing for a NZ rate cut, a dramatic turn from expectations of rate hikes just a month ago.
Markets pricing now implies 26 pct risk of a rate cut next month and 27 bps of cuts over the next year, even as analysts expect rate hikes early next year.
In Australia, interbank futures fully priced for a 25bp rate cut in December and for the RBA to take the cash rate back to the 3.0 pct emergency setting by mid-2012.
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