SYDNEY/WELLINGTON: The Australian and New Zealand dollars stumbled to six-week lows versus the euro on Tuesday after Spain's request for a bank bailout and Greece's bond buyback plan suggested progress was being made to solve the euro zone debt crisis.
* Aussie steady on the US dollar around $1.0420 even as a run of weak domestic data adds to expectations the Reserve Bank of Australia will cut interest rates later in the day.
* Euro climbs to around A$1.2540 and around NZ$1.5925, its highest since late October, after Spain formally requested European funds to recapitalise its crippled banking sector.
* Euro gains broadly, hitting a six-week high of $1.3076 after Greece's announcement to buy back domestic bonds at higher-than-expected prices boosts expectation it will cut its soaring debts and unlock long-delayed aid.
* Aussie trades at $1.0420, unchanged from late levels in local session on Monday. It briefly dipped to $1.0393 on Monday as data showed sluggish labour demand, along with flat retail sales.
* Kiwi trades at $0.8205, little changed from late local levels on Monday. Technical support seen around that level, its 55-day moving average.
* Australian data further fuels speculation that RBA will cut rates by 25 basis points to 3.0 percent when it announces its policy decision at 0330 GMT. Data on current account, building approvals also due on Tuesday.
* Interbank futures imply a four-in-five chance of an easing in rates which would match the record low reached during the global financial crisis, while swap markets put the probability at 93 percent.
* With markets almost fully priced for a rate cut, an easing might have only a limited impact on the Aussie while no move at all would likely see it sharply higher.
* If it does cut, much could depend on whether the RBA statement hints at a continued easing bias into next year. Strong bids suspected below $1.0400, including from Asian investors, while offers seen above $1.0450.
* Technical support seen around $1.0399, the point of a trend line drawn connecting lows hit in June and October. More support lies at $1.0390, Aussie's 100-day moving average.
* NZ currency supported versus Aussie at NZ$1.2700 ahead of rate decision. Traders see risk of Aussie pushing down towards NZ$1.2650 if RBA delivers a rate cut as such a move would narrow the Aussie's rate advantage against the kiwi.
* Australian government bonds slip, taking a cue from softer US Treasury prices. Three-year contract indicated down 0.030 point at 97.400, while the 10-year contract slips 0.035 points to 96.900.
* New Zealand government bonds edge lower in early trade, pushing yields 2 basis points higher at the short end of the curve.
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