Aussie & NZ dollars bounce, buoyed by Asian stocks

WELLINGTON/SYDNEY: The Australian and the New Zealand dollars added to short-covering gains on Tuesday, bolstered by buoyant Asian shares and tentative hopes that euro zone officials will take bolder steps to tackle the region's debt problems.

Aussie at $0.9875, from $0.9716 in late New York trade, having gained more than 1 pct overnight. The bounce was still modest given it skidded to a 10-month low of $0.9622 on Monday and lost 5 pct just last week.

Recovering regional stocks and commodities, with Korean shares up 3.4 pct and Australian equities 3 pct higher, support risk currencies. Shanghai copper jumps nearly 5 percent, followed by lead and zinc also up 5 percent.

Earlier in Asia, Aussie had dipped to $0.9776, dragged lower by Japanese investors selling Aussie/yen.

Traders say the Aussie is battling resistance at the double top of around $0.9865, and a sustained break could retest the August low around $0.9924. Above there lies $1.0055, the 38.2 Fibo of the $1.0765/$0.9622 move.

The Aussie broke below parity last week and has remained under it since then. It dipped below $1.00 for a few hours in August, which ended its longest uninterrupted stint above $1.00 since it was floated in 1983. The Aussie has lost nearly 7 pct this month.

Support is found at the Sept. 23 low of $0.9621, then the 50 pct retracement of the year's low/high is at $0.9573.

NZ dollar advances to $0.7818, from $0.7713 in NY, having dipped to a trough of $0.7767 earlier in the session. It has fallen 8.5 pct this month.

Kiwi looking hesitant to break higher, with $0.7830 capping the upside, while support sitting around $0.7638.

Against the kiwi, Aussie at NZ$1.2594, off a two-week peak of NZ$1.2672 on Monday. Market pricing still implies a 10 pct chance of a rate cut in NZ in October, compared with 39 pct in Australia, where a rate review is due next week.

The Antipodeans hold their ground on the cross rates. Against the yen, the kiwi at 59.51 yen , off a six-month low of 58.21 struck this week, while the Aussie at 75.06 yen , off a 13-month low of 73.28. Traders cite talk of possible intervention for Japan's end of financial half-year.

Japan's government said it will bring forward steps to ease the pain of a stronger yen but didn't give many details.

The euro retreats to A$1.3735 from a six-week high of A$1.3909 struck on Monday. Likewise against the kiwi, the euro slips to NZ$1.7318 from a one-month peak of NZ$1.7543.

A labour market indicator points to some softening in the job market in July, as the economy slowed.

No major data due in NZ, Australia.

NZ government bonds also weaker with local yields up to 5 bps higher along the curve. Swap yields also higher, with two-year yields around 3.06 pct, off record low of 3.0 pct struck last week.

China plans to set up an offshore yuan investment fund to lift the currency's international status and reduce reliance on the US dollar, according to official Chinese media.

China is a growing investor in Australia's booming natural resources.

Australian bond futures follow US Treasuries lower as appetite for risk improves, with the three-year contract down 0.13 points at 96.460. The 10-year dropped 0.13 points to 95.840.