Aussie & NZ dollars head higher as EU strains ease

WELLINGTON/SYDNEY: The Australian and New Zealand dollars were up near three-month highs on Tuesday as investors wagered a deal on Greek debt would get done sooner or later while signs of easing liquidity strains in Europe bolstered risk sentiment generally.

* The Aussie was up at $1.0520, from $1.0486 in late local trade on Monday having leaped as high as $1.0574 late in New York. Resistance at $1.0579, with support at $1.0450.

* The New Zealand dollar similarly jumps and then settles around $0.8100, from $0.8060 in late local trading Monday. It touches its highest level since the end of October at $0.8143. Support seen at $0.8050 and resistance $0.8150.

* The euro hits a three-week high against the US dollar as investors take profits on short positions, bolstered by signs of progress on a Greek debt restructuring deal. French Finance Minister says a deal with private-sector investors about resolving Greece's debt crisis was taking shape.

* Analysts caution that a deal for Greece may signal a bit more stability for the country, which needs additional aid to be able to return its debt to sustainable levels, but it will not signal an end to the euro zone's debt woes.

* Still, there is growing relief that the ECB's massive three-year lending binge for banks has stabilised the liquidity situation in Europe and given politicians the time to sort out a lasting fiscal deal.

* Local data calendars empty so attention on Australia's fourth quarter CPI report, due on Wednesday. A benign reading would set the stage for a further cut in interest rates. Data on Monday showed producer prices rising only marginally last quarter.

* Forecasts are for annual underlying inflation of 2.4 percent, well within the Reserve Bank's target band of 2.0 to 3.0 percent. Such an outcome would cement expectations for an interest rate cut at the central bank's Feb 7 policy meeting.

* Interbank futures already imply a 62 percent chance of a 25 basis point-easing next month, with rates of 4 percent fully priced in by March.

* Trading to be subdued as many Asian markets, including China, Hong Kong, Singapore and South Korea, are closed for the Lunar New Year holiday.

* The euro pushes higher against the Aussie and kiwi on the more optimistic mood surrounding the euro zone.

* The euro up 0.7 percent to A$1.2362 against the Aussie. Against the kiwi it gains the same amount to NZ$1.6064.

* Against the safe-haven yen, the Antipodeans extend gains to 10-week highs. The Aussie stands at 80.87 yen, while the kiwi is 62.16 yen.

* New Zealand government bond prices slip with Treasuries, sending yields a tick higher across the curve.

* Australian bond futures give back more of their recent hefty gains. The three-year contract indicated down 0.04 points at 96.700, while the 10-year contract dips 0.07 points to 96.010.