SYDNEY/WELLINGTON: The Australian dollar struggled near a two-month low against the US dollar on Wednesday as investors speculated that more interest rate cuts were in the cards after the Reserve Bank of Australia cut its official rate to a record low on Tuesday.
Aussie trades at $1.0185, having fallen more than 0.5 percent to $1.0155 offshore, its weakest since early March. Bids suspected around $1.0150, where option barriers lie, are seen offering some near-term support.
The New Zealand dollar trades at $0.8454 in early local trade, having dipped to around $0.8440 after the Reserve Bank of New Zealand said that the currency was overvalued and that it was concerned about further strength.
Despite the slip, the kiwi remained above a low of $0.8423 hit offshore, when it fell in sympathy with the Aussie. It remained under slight selling pressure against the yen , the euro and other currencies.
The RBA's decision to cut rates to 2.75 percent on Tuesday, partly due to a historically strong currency, pulled the Aussie further away from a three-month high of $1.0583 hit a month ago, and pushed it to a 3 1/2-year low versus the New Zealand dollar around NZ$1.1965.
The Aussie suffers broadly, hitting a near three-month low against the euro around A$1.2910 per euro in offshore trade before paring losses to trade around A$1.2835. It trades 1.0 percent lower versus the yen at 100.70 yen.
Aussie may fall towards $1.00 as interbank futures <0#YIB:> show markets have almost fully priced a cut to 2.5 percent by August.
Resistance around $1.0250, while many see the next target as $1.0116, a trough hit in March.
Technical analysts say a weekly close below $1.0150 could accelerate selling down to $0.9980, the 61.8 percent retracement of the Aussie's June-September 2012 rally.
No major local economic data due on Wednesday, but China releases trade figures and any sign of softness could pressure the Aussie.
Kiwi sees technical support at $0.8366, its 55-day moving average, although market participants expect selling on a rise towards $0.8500.
Australian government bonds indicated lower after recent hefty gains. Three-year contract indicated down 0.030 points at 97.490. The maturity reversed some gains made on Tuesday, when the three-year yield fell to around 2.480 percent, its lowest since October.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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