The Australian and New Zealand dollars drifted off multi-month lows against the greenback on Friday, but looked set to post their biggest weekly fall this year after weak manufacturing surveys from China and Europe reignited global growth worries. The Aussie was at $1.0408, up from $1.0386 late in New York and Thursday's low of $1.0333.
Still, it was on track to fall 1.8 percent this week, its largest for 2012. The New Zealand dollar stood at $0.8120, up slightly from $0.8093 in New York in an uneventful session, as it recovered from a two-month low of $0.8058 touched overnight. The kiwi, which has been the leader of the commodity currency pack this year, is down around 1.6 percent for the week and looks to have run its course in the short term. Both Antipodean currencies also nursed heavy losses against the euro and yen. The euro bought A$1.2700, not far off a near three-month high of A$1.2740 set earlier in the week. Against the kiwi, it was at NZ$1.6272, having reached a 2-1/2 month high of NZ$1.6394.
The Aussie fetched 86.01 yen, well off the recent peak of 88.62, and the kiwi stood at 67.10, having retreated from a high of 69.11. Sentiment for commodity currencies turned sour this week after surveys showed manufacturing shrank for a fifth month in China, while factory activity in Germany and France - Europe's two biggest economies - also suffered big falls. "If the Aussie breached key support of $1.0301, we could see it go back towards parity," said David Scutt, a trader at Arab Bank Australia.
Traders said the market was also watching to see if China will easy policy this weekend to spur growth, which would be seen as risk positive. Markets have been speculating for weeks that Beijing would cut the reserve requirement ratio (RRR) for banks. "It China doesn't cut RRR, the Aussie will be clearly lower," he said. However, he noted that in recent months, each time the Aussie has gone through parity, it would quickly recover. "We need to be reminded that the European Central Bank, Bank of Japan, Bank of England, and the Fed all have massive quantitative easing programmes." "The Reserve Bank of Australia is keeping the cash rate very high and that will always draw people back to the currency. Unless there is a cataclysm in China, the Aussie will be very well supported," Scutt said.
"We wouldn't be surprised to see the pull-back extend. The NZ dollar still looks a little overstretched relative to short-term fundamentals," said Bank of New Zealand strategist Mike Jones. Renewed jitters about China and the eurozone had been compounded by soft local growth data, which hardened expectations that the Reserve Bank of New Zealand will be keeping rates on hold for the rest of the year.