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Australia, NZ dlrs edge back as vaccine euphoria wanes

SYDNEY, Nov 18 (Reuters) - The Australian and New Zealand dollars suffered a setback on Wednesday as market euphoria over vaccine news was tested by the reality of tighter economic restrictions across the United States and Europe.

Data out from Australia also showed annual wage growth hit a record low of just 1.4% last quarter, underlining the weak outlook for inflation and the need for monetary policy to stay super-loose for a long time to come.

The Aussie duly eased off to $0.7281, having failed to clear resistance at its November top of $0.7340. Support lies around $0.7266 and $0.7222.

“Markets are travelling with the hope effective vaccines will prevent a severe global economic downturn, but we are not out of the woods yet,” said Ray Attrill, head of FX strategy at NAB.

“Still, China’s ongoing strong economic recovery and buoyant commodity prices, mean a sustained upside break of the prevailing $0.7000/$0.7400 range is increasingly likely.”

The kiwi dollar faded to $0.6882 and away from a 19-month peak of $0.6919. The kiwi has been on a tear recently as the market lengthened the odds of further policy easing in New Zealand and sent bond yields sharply higher.

The Reserve Bank of Australia (RBA) eased just a couple of weeks ago and has been busy buying bonds to limit any rise in yields. Yields on 10-year paper dipped to 0.90% on Wednesday, off a recent 10-week high of 1.00%.

Three-year yields fell back to 0.123% and nearer the RBA’s target of 0.1%, having briefly spiked as far as 0.154% early in the week.

Investor demand for Australian debt remains robust with a A$6 billion ($4.37 billion) tap of a 2041 bond completed on Tuesday drawing bids worth A$18.6 billion.

A huge 67% of those bids were from offshore, the highest on record for any syndicated tap and up from 30% in the previous sale. Some 22% of the bids came from the UK, with Asia ex-Japan taking 17% and Europe 9%.

Fund managers snapped up 45% of the issue and hedge funds 19%.

$1 = 1.3732 Australian dollars Editing by Ana Nicolaci da Costa

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