Australia, NZ dollars get reprieve as bears turn on euro, sterling

By Wayne Cole

SYDNEY, Jan 3 (Reuters) - The Australian and New Zealand dollars steadied above two-year lows on Friday as speculative sellers turned their attention on the euro and sterling, though the reprieve was likely to be temporary given weakness in commodity prices.

The Aussie managed to edge up to $0.6202 AUD=D3, after hitting a fresh trough of $0.6183 at one stage on Thursday. That was perilously close to its 2022 low of $0.6170 and a break there would take it to levels not seen since the panic of the early days of the pandemic in 2020.

The kiwi dollar held at $0.5597 NZD=D3, having been as low as $0.5587 overnight. Its 2022 nadir was $0.5512.

The Aussie was indirectly aided by a sudden selloff in the euro which saw it slide 1.1% to A$1.6546 EURAUD=. Sterling dived 1.3% GBPAUD= for its biggest daily loss in more than two years, while the Aussie jumped 1% on the Swiss franc AUDCHF=.

There was no obvious catalyst for the moves, leading dealers to suspect hedge funds had taken advantage of illiquid New Year conditions to break chart barriers and force stop-loss selling.

Economic data out overnight were not exactly favourable for the commodity-sensitive Antipodeans, as factory activity in China and Europe continued to disappoint.

Worries about global demand have been a burden for resource prices, with industrial bellwether copper stuck at five-month lows. MET/L

The Reserve Bank of Australia's (RBA) measure of prices for the country's commodity exports has been at its lowest since 2021, having fallen over 10% last year.

In that regard, the weakness in the Aussie is a boon for exporters as it boosts returns from commodities priced in U.S. dollars.

In trade-weighted terms =AUD, the Aussie is at the bottom of a trading range that has lasted since mid-2020, a support for mining earnings but also a modest upside risk to inflation.

Figures on consumer prices for November are out next week and will help refine forecasts for the whole fourth quarter, which could be crucial in deciding whether the RBA cuts interest rates in February. 0#AUDIRPR

Analysts assume a quarterly rise in core inflation of 0.6% or lower would open the door to an easing, while 0.8% would likely slam it shut. An increase of 0.7% would make it a coin toss.

The last time core inflation rose by less than 0.8% was in the middle of 2021.

(Reporting by Wayne Cole; Editing by Jamie Freed)

((Wayne.Cole@thomsonreuters.com; 612 9171 7144; Reuters Messaging: wayne.cole.thomsonreuters.com@reuters.net))