Aussie & NZ dollars kept in check by stronger euro

WELLINGTON/SYDNEY: The Australian and New Zealand dollars struggled to extend gains on Friday as a broadly stronger euro triggered a wave of short covering sales on cross rates.

The Aussie little changed at $1.0400 from  $1.0407 in New York, up 1.2 pct this week.

Aussie held back by option expiries at $1.0400/10 and by euro/AUD short covering.

Support seen at $1.0370, Thursday's daily low, with resistance at around $1.0450, the 11-week peak set on Tuesday.

The NZ dollar steady at around $0.8024, from $0.8021 in NY, consolidating in a narrow $0.8015 and $0.8035 range. The kiwi seen supported at $0.7980 with resistance at $0.8080.

Kiwi gains are likely capped for now, after a surprise fall in consumer prices in the fourth quarter, along with a fall in job ads in December, and flat underlying consumer sentiment.

That backed views the Reserve Bank of NZ has plenty of time to keep rates on hold and ponder its next move in light of the global backdrop. RBNZ reviews rates on Jan 26, but no change is expected to the record low 2.5 percent rate.

Euro notches solid gains against the Antipodean dollars, after it plumbed record lows earlier this week. It jumps to A$1.2432, just under a 10-day peak of A$1.2453 struck earlier in the session. Euro rises to NZ$1.6141, having risen to its highest in seven days at NZ$1.6166.

Single currency near two-week highs against the dollar bolstered by a short-covering rally after successful bond sales in Spain and France.

Australia's terms of trade, the ratio of exports to imports, fell 4 pct in Q4 as lower prices for minerals and manufactured goods along with a weaker local dollar, helped push down the nation's export prices. Still, terms of trade remain at very high levels, up 9.1 pct in the past 12 months.

NZ government bonds soften as safety demand diminishes, yields three ticks higher along the curve after hefty falls in the wake of tame inflation numbers.

Australian bond futures ease, with the three-year contract down 0.07 points to 96.770. The 10-year contract also dips 0.07 points to 96.130.