Aussie, NZ dollar in holding pattern amid debt uncertainty

WELLINGTON/SYDNEY: The New Zealand and Australian dollars consolidated recent gains on Friday as fears about the euro zone's debt woes were rekindled and investors awaited developments on US debt talks.

The Aussie around $1.1000 against Thursday's late local level at $1.1059. It ranged $1.0976 to $1.1076 overnight, during which the US dollar made modest gains but investors remained cautious.

Aussie seen supported at $1.0950 before major support at $1.0890, with resistance at $1.1050 and then the 29-year high of $1.1081.

The kiwi dollar in a holding pattern around $0.8700, ranging between $0.8691 and $0.8755 overnight. Support seen at $0.8678 and then $0.8640 with the 30-year high of $0.8766 the first hurdle higher.

The euro falls broadly as dour European data and a jump in Italy's borrowing costs fanned fears of a spreading debt crisis in the euro zone. The euro has not benefited from the US dollar's woes amid the debt stalemate.

US data provides some cheer with the number of Americans claiming new unemployment benefits dropping last week, while pending sales of existing US homes unexpectedly rises. and

But US dollar sentiment is fragile and dependent on a deal on raising the federal debt ceiling and cutting the deficit.

The Swiss franc hits a record high against the dollar of 0.79900 franc on trading platform EBS, but the dollar gains against a basket of major currencies.

The central bank interest rate outlook for Australia and New Zealand offers support for the Antipodean currencies.

Rate rises are definitely on the New Zealand horizon after the Reserve Bank of New Zealand flagged a rate hike in the near future as the economy gathers pace and inflation pressures rise.

The Reserve Bank of Australia (RBA) is seen in a more tricky position after it recently said it would be prudent to wait a while before hiking, but then unexpectedly high Australian data has changed expectations.

Financial market pricing now implies only a one-in-5 chance of an Australian hike next week. Oddly, it still has 18 basis points of easing for the next 12 months, though that is down from 40 basis points earlier in the week.

Australian bond futures higher with the three-year contract up 0.010 points to 95.490, while the 10-year gain 0.005 points to 95.100.

NZ government bonds a touch firmer, and interest rate futures flat.

Second tier data in both countries on Friday, with building consents and household credit in New Zealand and private sector credit numbers in Australia.

Next week sees New Zealand wages and jobs data, while Australia, in addition to the interest rate call on Tuesday has retail sales and trade.

Copyright Reuters, 2011