Australian and New Zealand dollars soften

The Australian and New Zealand dollars struggled to extend gains on Wednesday after data from China showed inflation cooled in October as expected, but was still too high to spur a cut in Chinese interest rates. The fortunes of both Australia and New Zealand are closely tied to China, making their currencies vulnerable to news from the world's second biggest economy.
The Aussie dollar was at $1.0352, versus $1.0374 late in New York, while the kiwi stood at $0.7949 compared to New York's $0.7972. Both currencies also lost ground against the yen, reaching 80.25 and 61.61 respectively. China's annual inflation rate fell to 5.5 percent giving Beijing more room to fine tune policy to help an economy feeling the chill of a global slowdown.
"With little risk a of hard-landing, Beijing will unlikely engineer a policy U turn or cross-board easing before CPI inflation drops below 4 percent, in our view," said Hongbin Qu, co-head of Asian economic research at HSBC. Both Antipodean currencies rose overnight on reform hopes in Italy, although bulls stayed wary with Italian borrowing costs near levels seen as unsustainable.
Still, the Aussie and kiwi remained resilient in line with the euro, keeping traders from getting too bearish. "Italy is far more serious that Greece will ever be I can't see a positive outcome. The Aussie should be around 95 cents. I don't know why the rally was sustained when so much is ticking in the background," a frustrated trader at a European bank in Singapore said.
Italian Prime Minister Silvio Berlusconi on Tuesday said he would leave office after parliament approves a budget law that includes reforms demanded by Europe, which is struggling to prevent the debt crisis from spreading to the region's third largest economy.
News of Berlusconi's plan came as Greece scrambled to win emergency funds to avert bankruptcy as soon as next month. "The news (is) failing to bring any real conviction to the NZ dollar, it has stayed range bound and should remain that way," ANZ analysts said in a market note.
Support for the kiwi is seen at the week's daily low of $0.7918, with the 200-moving day average of $0.7993 capping the upside. For the Aussie, initial resistance is seen around $1.0400 with solid support at $1.0203, the November 3 trough. The Antipodeans retreated from multi-week peaks against the Swissy after the Swiss National Bank dampened expectations of imminent intervention. The Aussie was at 0.9275 francs, having surged to a five-month peak of 0.9361 on Tuesday. The kiwi was at 0.7120 francs, off seven-week highs of 0.7203.