SYDNEY/WELLINGTON: The Australian dollar clawed back losses on Friday as investors picked up the currency on the cheap after it fell to a two-month low, but it risked more losses on concerns over slower Chinese economic growth.
* The Australian dollar traded at $1.0380 after falling as low as $1.0305, its weakest since mid-January. The Aussie has suffered this week due to month- and quarter-end selling, and is poised end the month 3 percent lower.
* A fall below $1.0300 could open the Aussie to more losses, particularly if it breaks key support at $1.0296, the 50 percent retracement of its October-February rally.
* Much of the pressure came against the yen where speculators went gunning for stops under 85.00. That saw it slide as far as 84.60 at one stage before the short sellers took profits and lifted it back to 85.60.
* Weighing on the Aussie was fears that China's purchasing managers' index due over the weekend would show a slowing manufacturing sector.
* That would be taken as a negative for the Aussie as it may signal slowing demand for Australian commodities. However, notable that spot iron ore prices rose to their highest in over five months suggesting demand still healthy.
* Speculation the Reserve Bank of Australia may cut rates from 4.25 percent next week had also hurt the Aussie. Interbank futures imply around a 38 pct chance of a cut at the April 3 policy meeting, though most analysts expect no move.
* The Aussie suffered broadly in overseas trade, sliding to around 1.2870 per euro its weakest since against the euro since December, before bouncing back.
* Market now wary before euro zone financial officials meet later in the day to finalise the size of a euro zone fund to rescue debt-laden countries. Spain also releases its budget on Friday
* The New Zealand dollar also bounced back to $0.8175, having been as low as $0.8117, dragged down by losses in the Australian dollar.
* The kiwi outperformed the struggling Australian unit, which tumbled to a 5-1/2-month low around NZ$1.2660 according to Reuters charts. It pulled back to NZ$1.2705 by early local trade on Friday, little changed on the day.
* Market participants expect the kiwi's upside would be capped around $0.8200, as offers were seen looming above that level. Traders said that ahead of tha level, resistance lay at $0.8180, the 55-hourly moving average.
* The kiwi saw strong technical support below $0.8100, as its 200-day moving average lay at $0.8092, while $0.8060 was seen as a cushion given the failure of previous attempts to push the kiwi below that level earlier this month.
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