WELLINGTON/SYDNEY: The Australian dollar scaled a fresh all-time high against the wobbly euro and the kiwi climbed to a three-month peak on Friday as worries Europe's debt problems will drag on for many more months drove long-term yields to record lows.
Liquidity was thin with dealing rooms winding down early for year-end celebrations, though traders reported interest from Japanese bidders.
That helped nudge the Australian dollar up to $1.0157 from $1.0135 in New York.
The Aussie looked set to end the year almost where it started against the greenback, having showed a remarkable resilience to offshore events. It was down 0.7 percent for the year, following a hefty 14 percent gain in 2010.
The local currency has been through wild moves, trading in a 17 cent band as it was taken as a proxy for risk sentiment.
The euro remained on the ropes at A$1.2748, the fourth straight session of record lows. It struck a trough of A$1.2729, with a test of $1.2500 in sight, according to a trader.
"The last event of the year was the Italian auction and while it didn't materially disappoint, it could have gone better ... and it's been weighing on the euro more so," said Annette Beacher, head of Australia and New Zealand research at TD Securities in Singapore.
Italy had to pay nearly 7 percent to sell 10-year bonds at an auction. That was below the euro-era record seen at previous bond sales, but still uncomfortably high for a country that needs to raise 450 billion euros through debt issuance in 2012 while facing slow growth, according to traders.
The 10-year contract jumped 0.04 points to 96.285, having scaled an all-time record of 96.300. Its implied yield of 3.715 percent was far below the overnight cash rate of 4.25 percent.
The three-year contract also gained, adding 0.02 points to 96.920. New Zealand's 10-year yields likewise were hovering near-record lows around 3.79 percent.
The Australian dollar showed no reaction to HSBC China PMI, which came in at 48.7, within expectations though slightly under the flash reading of 49 earlier in the month. Australia is sensitive to news from China, its key export partner.
The official China PMI is due on Sunday.
NEW ZEALAND DOLLAR
The New Zealand dollar edged higher to $0.7728, from $0.7713 in New York and looked poised, just like the Aussie, to end the year in much the same position as it started.
It is fractionally lower for the year, having gone as far as $0.8842 and as low as $0.7125, tracking wild swings in risk appetite. In 2010, it gained 8 percent.
Against the euro, the kiwi jumped to levels not seen since late-September. The single currency fell to NZ$1.6748, and the cross rate is down around 3 percent for the year.
New Zealand government debt had a slight bid tone, sending yields up to 6 basis points lower.
Australia and New Zealand markets will reopen on January 3 and 4 respectively.
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