Aussie & NZ dollars savaged investors flee risk

WELLINGTON/SYDNEY: The Australian and New Zealand dollars nursed huge losses on Friday having plunged to multi-month lows overnight as investors abandoned once-popular trades in commodities and emerging market currencies in a heedless flight from risk.

* Aussie tumbles around 3 percent to its lowest since early December, as risky assets such as stocks and high yield currencies were dumped unceremoniously in favour of  the safety of Treasuries, the US dollar and yen.

* Aussie at $0.9750, having sunk as deep as $0.9692 from a high of $1.0040 overnight. It was the biggest daily loss since May 2010 when similar fears about global growth gripped markets.

* It has lost around 6 percent so far this week and breached major chart support at $0.9927. Next support at the 100-day moving average of $0659 while the 50 pct retracement of the year's low/high is at $0.9571.

* New Zealand dollar suffers just as badly, falling around 3 pct to a five-month low of $0.7752 before steadying for a moment around $0.7820. It had been around $0.7970 late on Thursday.

* Kiwi is down 5.8 percent this week and at levels last seen in May. Support initially at $0.7755 and below that $0.7706 with $0.7848 the first line of resistance. Longer term technicals point to a break of important support level around $0.7960 and opening the way to a decline to $0.7200.

* The latest investor panic and flight to safety triggered by a dismal economic outlook from the US Federal Reserve coupled with new signs of slowing in China and Germany, as representatives of 20 leading economies, IMF and World bank gathers for meetings.

* The demand for safe havens bolsters the US dollar, which rallies for its best day in a month, with the yen flying as Japanese investors rush to take money home.

* Gold, metals and oil battered. The Reuters-Jefferies CRB index falls 4.4 percent to its lowest point since early December while copper dived 7.5 pct.

* Unless there is a bounce in risk sentiment over the weekend, the Aussie may settle into a $0.9500 to $0.9700 range in the short-term.

* The Antipodeans take a hit on cross rates, with the kiwi extending losses against the safe-haven yen to a six-month trough of 59.46 yen . The Aussie dropped 3.2 pct to a 12-month low of 73.84 yen before lifting a shade to 74.40.

* Aussie and kiwi also slide around 2 percent against the Swiss franc and the euro. On trade weighted basis against basket of currencies Aussie is down 1.5 percent and the kiwi 1.3 percent down.

* Australia has the Reserve Bank of Australia financial stability report, but no NZ data on Friday. The RBA is sure to remind investors that the Australian banking system is sound, well capitalised and profitable, but it will be drowned out by cacophony abroad.

* New Zealand government bonds firm along with US Treasuries with local yields 7 basis points lower.

* Australian bond futures extend recent rally with the three-year contract up 0.09 points at 96.580. The 10-year gained 0.095 to 95.990 the highest since early 2009.

Copyright Reuters, 2011