Aussie & kiwi dollars drift off 4-year peaks vs yen

WELLINGTON/ SYDNEY: The Australian and New Zealand dollars pulled back from recent four-year peaks versus the yen on Monday while also losing ground to the US dollar, though holidays across much of Asia kept flows extremely thin.

The yen pared a little of its recent heavy losses after Japanese Finance Minister Taro Aso said it had weakened more than intended. The Aussie changed hands at 95.25 yen, from a peak of 97.42 set on Tuesday.

The kiwi was harder-hit, slipping 0.7 percent on the day to 77.06 yen. It climbed as far as 79.41 last week.

The Aussie and kiwi have still gained more than 15 percent since November on the belief that true reflation in Japan would require a much weaker yen.

The Aussie consolidated around $1.0304, from $1.0289 late locally on Friday when it dipped as far as $1.0256, its weakest in nearly three months.

The currency slide occurred after the Reserve Bank of Australia (RBA) trimmed its growth and inflation forecasts, leaving the door wide open for a further rate cut should the economy disappoint.

Interbank futures imply a 50-50 chance of a quarter point easing in March to a record how of 2.75 percent, while swap markets see two more cuts this year.

A dip in Australian housing finance in December, against forecasts of no change, did little to alter the odds. Traders reported very limited flows as much of Asia is shut for the Lunar New Year holidays.

Japan, China, Hong Kong, Singapore, South Korea and Taiwan are among the major centres in the region closed on Monday.

Key events for the Antipodean currencies this week will be statements from officials at the US Federal Reserve and a G20 meeting on Thursday and Friday attended by global finance ministers and central bank governors.

"(Officials in Europe) will probably still highlight the downside risks to Europe and that should bring some money back into the Aussie," said Martin Whetton, a strategist at Nomura.

The Aussie was seen supported around $1.0256, with resistance at $1.0349.

Charts, however, show more downside with the 5-,10- and 20-day moving averages pointing south, along with Bollinger bands.

The New Zealand dollar edged lower to around $0.8345 in late trade from $0.8347 in New York on Friday.

The kiwi lost more than 1 percent last week following a soft labour report and still remained a fair way off an 18-month peak of $0.8493 set last Monday.

Imre Speizer, a Westpac senior strategist, said the kiwi could still aim for $0.8570, the high of August 2011, as long as a key support at $0.8250 is not broken.

"Economic fundamentals remain kiwi-supportive while extended long positioning remains the main negative risk," Speizer said.

"With technicals looking less supportive this week, we switch to a neutral stance for the week ahead but retain a positive one longer term."

New Zealand government bonds were softer, with local yields up to 1.5 basis points higher.

Australian government bond futures edged up with the three-year contract 0.03 points higher at 97.210 and the 10-year contract gaining 0.025 points at 96.575.