[SYDNEY] The Australian and New Zealand dollars were knocked lower on Friday after ratings agency Moody's cut the outlook on Australian banks to negative, providing investors an impetus to sell both currencies.
The Australian dollar dropped 0.7 per cent to US$0.7632, pulling away from a recent three-week peak of US$0.7760. Support was found at US$0.7608.
Traders said the Antipodeans were ripe for a correction and sellers surfaced on news that Moody's was considering cutting the ratings of Australia's major banks due to sluggish profit growth .
Also undermining the currency was euro buying after stops were tripped above A$1.4800. The euro sped up to A$1.4827 , having bounced four US cents since a low touched last week.
The Aussie was on track for a loss of 0.7 per cent for the week, having erased earlier gains made on speculation the US Federal Reserve is in no rush to raise interest rates.
Against its kiwi cousin, it shed nearly 1 per cent for the week to be at NZ$1.0522. Aussie weakness also reverberated around the New Zealand dollar which came under pressure as New Zealand's banks are owned by Australian financial institutions.
The Kiwi shed half a US cent to US$0.7255, having touched a 14-month peak of US$0.7351 last week.
It has met strong resistance around the US$0.7300 level and was up 0.7 per cent for the week.
"It has tried about nine times over the past eight weeks and it has failed to push further on all occasions," BNZ currency strategist Jason Wong said in a research note.
Data released on Friday showed New Zealand's net migration continued to rise, though this had little immediate effect on the Kiwi.
New Zealand government bonds eased, sending yields 2 basis points higher at the long end of the curve.
Australian government bond futures were quiet, with the three-year bond contract steady at 98.630. The 10-year contract edged down half a tick to 98.1150, while the 20-year contract added half a tick to 97.5900.
The spread between 10-year and 3-year government bonds widened to 52 basis points, the fattest since late June. Yields on two-year bonds edged up to 1.43 per cent, having touched an all-time low of 1.42 per cent on Thursday.