WELLINGTON/SYDNEY: The Australian and New Zealand dollars found a tentative footing on short-covering gains on Friday, having slipped to two-week troughs when worries surrounding the European debt crisis fed a bid for safe-havens like government debt.
The Aussie dollar edged up to $0.9977, from $0.9919 in New York, climbing off Thursday's trough of $0.9862. Firmer stocks in Asia, as well as, buying from Tokyo players and Australian exporters provided some support.
Still, the local currency is nursing a loss of 2 percent this week. Traders said the short-term market remains short, with bids as low as $0.9700. Without stops of decent size this side of $0.9650, this suggests the trend is lower.
"I can't see a bullish trend to Christmas ... because the threat out of Europe is clearly there and the threat of an S&P downgrade of the euro zone is in the background," said David Scutt, a trader at Arab Bank Australia.
France is at risk of losing its triple-A status, with markets fearing that it could suffer as much as a two-notch downgrade as early as today.
By comparison, Australian debt is considered relatively safe given the government's strong fiscal position and top notch rating.
Australian debt futures scaled fresh highs before running into some profit taking. The three-year contract, which hit a three-year peak of 97.060, last traded at 97.000. The 10-year contract touched an all-time high of 96.250 and was last at 96.190.
KIWI OFF LOWS
The New Zealand dollar nudged up to $0.7599 from this week's low of $0.7461, but was still down around 2 percent for the week.
"A calmer finish to the week for the kiwi may well disguise potential moves next week as market liquidity falls with the approaching Christmas/New Year break," said ANZ-National senior dealer Alex Sinton.
The kiwi could retest $0.7675, the high on Tuesday, then $0.7760, while support is seen around $0.7532.
The Antipodeans climbed off two-week troughs versus the safe-haven yen, but were nursing heavy losses. The Aussie was last at 77.62, down 2 percent for the week, while the kiwi traded at 59.13, 1.7 percent lower since Monday.
The kiwi notched gains against Aussie, helped by the expiry of several large options. However, a widening rate gap likely to keep further gains in check. Aussie was softer around NZ$1.3116 .
In focus next week will be New Zealand's third-quarter current account and GDP numbers, with expectations the current account deficit will widen to 3.9 percent of GDP, while growth will be a relatively robust 0.6 percent.
Markets interest rate outlook was little changed, with pricing for next month implying a 22 percent chance of a 25 basis point cut and a total easing of 17 bps next year.
New Zealand government bonds fell, with yields up to 7.5 basis points higher. The 10-year yields edged off all-time lows struck on Thursday.
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