SYDNEY/WELLINGTON: The Australian and New Zealand dollars retreated on Thursday as equity weakness across the Asian region wore away at recent gains in a cautious environment.
The Aussie dollar dipped 0.5 percent to $1.0480, dragged lower by S&P futures down 0.8 pct and Korean shares sliding 2 percent on lingering worries about global growth and sovereign debt issues.
The local currency shed more than a cent, having hit a 10-day peak overnight at $1.0601. It broke through decent buying interest around $1.0500 and stops were triggered below $1.0490. The next level of support is found at $1.0433, Wednesday's low. Still, the high-yielding currency has made a remarkable recovery since it toughed below parity last week.
With market sentiment still fragile, traders said data due later in the day, including US consumer prices, existing home sales and regional manufacturing data will be closely watched.
Joseph Capurso, strategist at Commonwealth Bank of Australia, expected the Aussie to head back to $1.10 in the next couple of weeks, underpinned by what he called a weak US economy, low US yields and softer dollar.
The Australian dollar scaled a 29-year high of $1.1081 late July.
"CPI is out tonight in the US and the risk is that it would be a little softer... It would put downward pressure to the US dollar," said Capurso.
Traders reported a formidable resistance level for the Aussie in the $1.0630-45 zone, the confluence of the 20-day MA, the Ichimoku cloud base and top and the 61.8 percent retracement of the $1.1081/$0.9927 move.
The New Zealand dollar softened to $0.8325 from $0.8372 in New York in a subdued session, after hitting a nine-day high of $0.8425 overnight.
"It's all pretty quiet. Domestically there's no major data coming out and every one is just taking a back seat and waiting for US data," said ANZ-National head of market economics and strategy Khoon Goh.
Top resistance remained at $0.8430, after failing to sustain above $0.8400, while support was seen from $0.8313.
Against the kiwi, the better-performing Aussie held on to gains around NZ$1.2591, well-off last week's one-year trough of $1.2302.
Markets now imply 28 percent chance of a 25 basis point hike next month in New Zealand, down from 32 percent earlier, and 50 bps over the next 12 months from 57 bps in the morning.
While some risk assets did well, Treasuries still managed to rally strongly suggesting investors might be looking ahead to more quantitative easing by the Fed.
The Bank of England also took a step toward further easing with a very dovish MPC, and ECB council member Nowotny voiced concerns about slow growth and low inflation.
The prospect of more global easing keeps NZ government debt prices firm. Australian bond futures also rose, with the 3-year contract up 0.09 points at 96.280 and the 10-year up 0.105 points at 95.615.
Copyright Reuters, 2011
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