WELLINGTON/SYDNEY: The Australian and New Zealand dollars nursed rare losses against a broadly firmer euro on Friday, as strong demand at a Spanish debt auction softened euro zone worries and unleashed a wave of pent-up short-covering.
The Antipodeans finally ran into profit-taking after posting record highs against the euro through the week. The single currency last stood at A$1.3021, having jumped 0.8 percent offshore and now back where it ended on Friday.
Euro still off 2.0 percent this month and struck a lifetime trough of A$1.2291 on Thursday.
Against the kiwi, the common currency rose to NZ$1.6209 , after jumping nearly 3 cents overnight. It has lost 2.6 percent this month and sunk as deep as NZ$1.5917.
As technicals point to more consolidation ahead for the euro on both Antipodean currencies, some forecast an even larger correction for the Australian dollar.
"While every economic fundamental supports such AUD outperformance, such as high real yields, sound fiscal position, exposure to Asia, credible government and central bank, and robust shape of the banking sector, valuations are looking a little stretched," said Annette Beacher, head of Australia and New Zealand research at TD Securities in Singapore,
She said by comparison, the EUR/NZD pair doesn't look as stretched.
"We remain convinced that another bout of risk-off trading in the coming months will hurt the AUD comparatively more."
Beacher expects the kiwi to outperform based on her view that the Reserve Bank of New Zealand is unlikely to be easing aggressively this year, unlike the Reserve Bank of Australia.
The euro made an impressive rally across the board overnight after a solid sale of Spanish and Italian debt calmed funding fears while ECB chief Mario Draghi said the euro zone was showing signs of stabilisation.
Immediate resistance for EUR/AUD is found at A$1.2500, the Jan 9 peak, while against the kiwi, a break above NZ$1.6200 could suggest a move all the way up to Sept 19 low at NZ$1.6482.
ANTIPODEANS HOLD GAINS VS U.S DOLLAR
Both Antipodean currencies held recent gains against the greenback, having jumped more than one percent this week.
The Aussie was last at $1.0308, with initial support seen at $1.0286, the intra-day low ahead of a key bulwark at $1.0220.
It will face formidable resistance in the $1.0351/1.0403 area where it met no less than seven rejections.
The New Zealand dollar last stood at $0.7905, just under Thursday's two-month high of $0.7980. Key support was seen at $0.7866, with initial resistance at $0.7981 ahead of $0.8000.
The Antipodean pair trimmed recent hefty gains against the Swiss franc, in line with their retreat against the euro.
The Aussie dipped 0.8 percent to 0.9738 francs, while the kiwi was even softer, down 1.5 percent at 0.7463 .
The solid selling of the kiwi against the euro and other currencies fuelled its decline against the Aussie, which rose to NZ$1.3028 from NZ$1.2924. It touched a 10-week low of NZ$1.2910 on Thursday.
New Zealand government bonds fell, sending yields up to 0.05 points higher along the curve, while Australian bond futures slipped. The 3-year contract eased 0.08 points to 96.770 and the 10-year contract was 0.065 points lower at 96.145.
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