WELLINGTON/SYDNEY: The Australian and New Zealand dollars ran into light profit-taking on Wednesday, but remained near multi-month highs on persistent hopes the European Central Bank and Federal Reserve will add more stimulus soon.
The Aussie dollar dips to $1.0550, from $1.0576 late locally on Tuesday. Support seen solid at $1.0527, the week's low, with resistance at the mid-March high of $1.0637.
It peaked to $1.0604, its highest in four months, on Tuesday after the Reserve Bank of Australia left interest rates on hold at 3.5 pct and appeared in no hurry to cut borrowing costs again.
Markets have been sharply scaling back expectations for further aggressive easing from the RBA, in part because of hopes for action abroad by the ECB and Federal Reserve. Interbank futures now imply a 25 basis-point cut in November, when they had been priced for September.
Overnight indexed swaps imply rates of 3.13 pct in 12 months, compared to as low as 2.5 pct back in June.
Likewise, Australian bond futures have come off sharply in the last couple of weeks, having dropped to their weakest since early May.
The three-year contract falls 0.05 points to 97.200, a long way from July's peak of 97.950. The 10-year contract eases 0.075 points to 96.755, having touched an all-time peak of 97.360 in June.
Aussie weighed by short-covering in the EUR/AUD. With risk sentiment holding up for now, the euro has been slowly edging up from all-time lows and last fetches A$1.1746. A dealer says a correction higher would not be surprising.
The New Zealand dollar slips slightly on the day to $0.8150, below a three-month high of $0.8224 hit earlier in the week. * Kiwi weighed after a media report quotes New Zealand Prime Minister Key as warning investors against betting too heavily on a high kiwi, adding a strong currency could cause the economy to stall.
Technical signs suggest more near-term pressure for the kiwi, after it breaks below support at $0.8158, its 100-hour moving average. As a result, the kiwi was vulnerable to a fall towards support at $0.8121, its 200-hour moving average.
Kiwi slips 0.2 percent to 63.95 yen, back from a three-month high around 64.55 yen hit on Tuesday. The New Zealand currency is also on the backfoot versus the euro .
Aussie regains some ground against the kiwi at NZ$1.2933 , from a three-week trough of NZ$1.2830 overnight, as investors pared back rate-cut expectations in Australia.
New Zealand government bonds softer, with yields as much as 4 basis points higher at the long end of the curve.
Local data showed Australian home loan commitments increased to 1.3 pct in June, slightly under forecasts of a 2 pct rise.
Investors are waiting for the Australian jobs report on Thursday with economists expecting a rise of 10,000 and the unemployment rate ticking up to 5.3 percent.
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