WELLINGTON/SYDNEY: The Aussie and New Zealand dollars edged higher on Wednesday after Australia reported solid economic growth in the third quarter, though gains were capped as investors remained focused on crucial developments in Europe later in the week.
The Aussie jumped as high as $1.0278 after data showed the resource-rich economy grew a healthy 1 percent in Q3, before stabilising at $1.0266, from $1.0237 in New York.
The brisk growth came thanks to booming business investment and surprisingly upbeat household consumption. While the GDP report underlined how Australia was faring much better than its rich-nation peers, policy makers remain very much focused on the risks from Europe.
"With everyone long to the gunnels, it may be hard for the Aussie to push higher before the EU summit begins," said David Scutt, a trader at Arab Bank Australia.
European leaders will hold a summit on Friday and investors are cautiously optimistic that recent credit warnings by Standard & Poor's would spur more decisive action.
The Reserve Bank of Australia (RBA) has already cut interest rates by 50 basis points to 4.25 percent this quarter as a more benign inflation outlook at home allowed it to take insurance against a global slowdown.
Interbank futures only slightly trimmed expectations of further rate cuts on Wednesday. The March contract pricing implies at least two cuts of 25 basis points and June implies a total easing of 113 bps.
Resistance for the Aussie, which has gained 6.3 percent since hitting a trough of $0.9664 on Nov 23., is found at the top of the daily Ichimoku cloud at $1.0274.
The next key barrier is at $1.0337, the 61.8 percent retracement of its recent slide from $1.0753 to $0.9664, a level that held twice last week. Support is seen at $1.0150.
The Antipodeans climbed to multi-month highs against a broadly weaker Swissy on talk of intervention from the Swiss National Bank to bolster its economy. The Aussie jumped to a six-month peak of 0.9510 francs, while the kiwi hovered around two-month peaks of 0.7215 francs.
Aussie debt futures fell, tracking US Treasuries, with the three-year contract down 0.08 points at 96.800, and the 10-year contract 0.04 points lower at 96.000.
NEW ZEALAND DOLLAR
The kiwi marked time at $0.7798, vs late NY level of $0.7795, ahead of the Reserve Bank of New Zealand rate decision on Thursday.
Markets and analysts are unanimous in picking no change to the record low 2.5 percent cash rate. The key question is how much of a tightening bias the bank may retain.
"Expect the topside cap to be lowered with the potential to test support given the approaching RBNZ monetary statement and the European Union summit," ANZ-National Bank analysts said in a market note.
Support is seen around $0.7723, while resistance is pegged at $0.7840. NZ government bonds were little changed.
The kiwi was aided by a second consecutive rise in dairy prices in the latest Fonterra auction, after recent declines.
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