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SYDNEY: The Australian and New Zealand dollars were on the defensive on Wednesday after fears of global recession slugged commodity prices, while also lowering bond yields as investors pared back wagers on sharply higher interest rates.

The Aussie was huddled at $0.6810, having slid 1.0% overnight to a two-year trough of $0.6762. The pullback threatened chart support at $0.6750, with resistance now at Tuesday’s top of $0.6895.

The kiwi dollar stood at $0.6177, having also hit a two-year low of $0.6125. There is not a lot of chart support until $0.5930, while resistance lies at $0.6226.

The Aussie still managed to gain on the euro as soft European data saw markets scale back expectations for rate hikes there, slapping the euro down 0.8% to A$1.5105.

Investors also had second thoughts about how far the Reserve Bank of Australia (RBA) might ultimately raise rates, after it hiked by 50 basis points on Tuesday to 1.35%.

Futures still lean toward another 50 basis points in August and further moves to 3.1% by year end, but the peak for rates is now seen around 3.5% compared to more than 4% a month ago.

Most economists doubt the RBA will be even that aggressive given policy makers expect inflation to ease next year and highlighted concerns about how households would cope with higher borrowing costs.

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