SYDNEY/WELLINGTON: The Australian and New Zealand dollars regained ground on the euro after a top European official complained about its recent run higher, but extended losses on the yen following a warning about its excessive weakness by a Japanese official.
The euro fell across the board after the chairman of the euro zone finance ministers said the euro was "dangerously high".
Traders said the comments simply gave investors an excuse to cash in on recent gains, sending the euro to A$1.2567, more than a cent lower from an overnight peak.
The euro skidded to NZ$1.5790, from a peak of NZ$1.5926 on Tuesday, well off a two-week high of NZ$1.5975 set earlier in the week.
For dealers, however, the correction does not necessarily mean a reversal in the uptrend. The common currency has rallied more than 2 percent versus the Antipodean currencies since the November lows.
"The euro could suffer bigger falls but that is still some way off," said Greg Gibbs, a strategist at Royal Bank of Scotland in Singapore, seeing the euro slipping to A$1.2200 in the second half of the year.
He said the euro/Aussie is not far from where it should be, highlighting recent improvement in financial conditions in Europe which should keep the euro solid for some time.
Support was found at A$1.2530, the 50 percent retracement of the January climb, ahead of A$1.2490, the 61.8 percent of the move, with resistance at A$1.2700.
In a similar reaction that prompted a reversal in the yen, investors unwound bearish positions in the Japanese currency after Japan's Economics Minister warned that excessive yen weakness could boost import prices, hurting people's livelihood.
The Aussie was knocked back to 93.05 yen, its lowest in a week, showing a 0.8 percent loss on the day. It climbed to a fresh four-year peak of 94.63 on Tuesday.
The kiwi skidded to 74.05 yen, having touched a peak of 75.49, its highest since Sept 2008, earlier in the week.
Still, the Antipodean currencies have risen more than 13 percent against the yen since November on expectations the Bank of Japan will be forced to take bold action to beat deflation.
The Australian and New Zealand dollars held near multi-month highs against their US counterpart with the Aussie steady at $1.0563, within reach of a four-month peak of $1.0600 set last week.
Support was seen around the 10-day moving average at $1.0520, with option related sellers lined up ahead of $1.0600.
The Aussie was underpinned by a modest improvement in Australian consumer confidence and record high car sales, a sign consumers are still ready to splash out on big ticket items even while penny pinching elsewhere.
The NZ currency traded 0.2 percent higher at $0.8410, not far from a s16-month peak of $0.8477 set in December.
The kiwi has been supported on the view that the New Zealand economy is improving, but it has faced resistance at $0.8440.
Tim Kelleher, head of institutional FX sales at ASB, said the kiwi was looking overbought.
"I'm a seller of the kiwi at $0.8425-$0.8450, and we see the risk of a fall towards $0.8350-$0.8300," he said.
NZ government bonds inched up, keeping yields a touch softer.
Australian government bond futures edged up. The three-year contract was 0.03 points firmer at 97.220 and the 10-year contract 0.05 points higher at 96.630.
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