SYDNEY/WELLINGTON: The Australian and New Zealand dollars struggled to make friends on Wednesday, following another slide in commodity prices - particularly iron ore and dairy.
The Australian dollar dropped to $0.8683, from $0.8728 in early trade, pulling away from a high of $0.8796 touched Monday. Support was found at $0.8667, and more solidly around $0.8637-40. It hit a four-year trough of $0.8540 earlier this month.
Much of the weakness came after the price of iron ore, Australia's top export earner, slipped to its lowest in five years at $72.10 a tonne.
Not helping were comments made late Tuesday by Reserve Bank of Australia's Governor Glenn Stevens who reiterated his view that the Australian dollar remained above its fundamental value and a fall would help the economy.
The Aussie was also dragged lower by a pressured New Zealand dollar following a weak Fonterra milk auction. The kiwi eased to $0.7886, from $0.7928 in early trade and this week's peak of $0.7975.
Losses were felt across the board, knocking the kiwi off a seven-year high versus the yen.
Falling prices for New Zealand's biggest export earner will likely prompt dairy co-operative Fonterra to cut its payout forecast to farmers next month, further reducing their incomes and slowing the pace of economic growth.
"Another weak GlobalDairyTrade auction suggests little support for the NZD from our largest export," ANZ analysts said in a note.
Support was found at $0.7845, the 200-hour moving average. Australian government bond futures rose, with the three-year bond contract up 3 ticks at 97.450. The 10-year contract added 1 tick to 96.705.
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