SYDNEY/WELLINGTON: The Australian and New Zealand dollars extended losses to multi-week lows against the euro on Wednesday, as growing speculation about euro zone plans to rescue debt-laden countries sparked widespread short-covering in the single currency.
The selling of Aussie for euros, which has been a very crowded trade recently, pulls it back against the US dollar, taking it 0.4 percent lower on the day to $1.0440, from $1.0470 in early trade.
The euro powers up to five-week highs at A$1.1936 , having broken major resistance at A$1.1850 as investors trim euro bearish bets. Charts indicate minor barriers ahead with scope seen for a move to A$1.20-A$1.21.
Euro has gained nearly 3 pct since it hit a record low of A$1.1597 earlier this month.
Likewise, the single currency climbs to four-week highs around NZ$1.5424 against the kiwi.
Euro strength weighs on New Zealand dollar which drifts back to $0.8081 against the greenback from an opening $0.8110. It briefly touched a one-week high of $0.8144 overnight.
Near term support around $0.8060 with the overnight high of $0.8144 likely to cap the topside.
Talk of another massive stimulus plan in regional China does little to comfort the Antipodean currencies. Aussie and kiwi dollars are sensitive to news out of China, a key export market.
The northeast city of Tianjin plans to invest $236 billion in 10 major industries over the next four years, the local government said on its website, joining other cities in rolling out big spending plans to boost its economy.
Weighing on Aussie and kiwi are lower Asian stocks tracking an overnight fall in US equities.
Support for the Aussie seen at $1.0400, having easily broken through $1.0453, the 61.8 Fibo retracement of the rise from $1.0411 to $1.0522. Traders cited stops below $1.0440.
Next flash point is the US Federal Reserve's release of its last policy meeting followed by HSBC's Flash PMI for China on Thursday.
Australian government bonds jump, with the three-year contract up 0.10 points to 97.250, while the 10-year contract adds 0.08 points to 96.715.
New Zealand government bonds edge higher, sending yields up to 2.5 basis points lower.
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