A bout of short-covering lifted the Australian and New Zealand dollars from three-week lows on Wednesday, but Europe's debt woes and tensions on the Korean peninsula prevented the pair from climbing too far. Traders said speculators had bet against the Australian dollar after Tuesday's sell-off, but they were caught out by buyers such as Australian exporters earlier Wednesday.
That culminated in a short squeeze that led to the bounce in the pair. By late trade, the Australian dollar had crawled to $0.9779, off a three-week low of $0.9708 hit offshore on Tuesday, but still way under the week's high of $0.9955. The Australian dollar had sunk 1.7 percent in Tuesday's offshore trade, making that its biggest daily loss in five weeks and a long way from October's 28-year peak of $1.0183.
In late trade, the New Zealand dollar was also soft at $0.7622, within spitting distance of a three-week low of $0.7578 hit offshore. Overnight it had suffered its largest daily drop in four months. Loss of support at $0.7630 opens the way to $0.7562 and $0.7492.