SYDNEY/WELLINGTON: The Australian and New Zealand dollars extended losses on Wednesday, weighed by falling Asian stocks and a bounce in the euro as investors fretted that minutes of the Federal Reserve's July meeting would flag a pullback in stimulus.
The Aussie slipped to $0.9028, from $0.9070 in early trade, well off a three-week high of $0.9234 touched on Monday. The currency is again being sold by investors as a hedge against weakness in Asian markets more broadly.
"A big fall in Indonesia's rupiah and significant volatility in Asian currencies are keeping the Aussie off," said Greg Gibbs, a strategist at Royal Bank of Scotland in Singapore, who sees the Aussie testing recent lows of $0.8848.
Part of the move was caused by a spike in the euro across the board on talk European investors were repatriating funds from emerging markets. The euro has climbed four cents to A$1.4873, from a low of A$1.4437 on Monday.
Charts suggested further upside with resistance found at A$1.4900 and support at A$1.4735.
Against the kiwi, the euro rose to NZ$1.6940, bringing gains so far for the week to 3 percent.
The Antipodean currencies also fell against the yen while the pound flew near its highest in three years against the Aussie at A$1.7359. Technicals point north and a break would target A$1.7606, the August 2010 peak.
Markets were focused on whether minutes of the Fed's last policy meeting due later in the session will give clues on whether it will start reducing its bond-buying stimulus as early as September.
Immediate support was found at $0.9020 where traders cited weak stops and a break would target $0.8995.
The New Zealand dollar extended losses to $0.7921, from $0.7977 early and hit a two-week low against the euro . It was also on the back foot against the yen and pound.
The kiwi was already under pressure after Reserve Bank of New Zealand Governor Graeme Wheeler announced home lending restrictions on Tuesday to help cool an overheated market without having to raise interest rates and so push the currency even higher.
His comments pushed back some expectations of a rate rise, although markets still anticipate the central bank will lift rates by 25 basis points to 2.75 percent in the first quarter of 2014.
The best outcome for kiwi bulls would be if the Fed played down the need to start tapering early.
"Should tapering not be discussed, markets could sell USD further, supporting NZD/USD," ANZ analysts said in a note, adding that a recovery towards $0.8080 was possible.
New Zealand government bonds were a touch firmer, sending yields 1.5 tick lower along the curve.
Australian government bond futures bounced from multi-week lows as Treasury yields declined. The three-year bond contract added 2 ticks to 97.240, having touched 97.130 on Tuesday, its weakest in six weeks.
The 10-year contract was also up 2 ticks at 96.040 after falling to a two-month low of 95.935.
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