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Asia Recap: Kiwi selling dominant theme

FXStreet (Bali) - The Kiwi was hit by a fresh round of selling in the early stages of the Asian session, finishing as the worst performer, while on the flip side, the Aussie was the main winner.

NZD selling was the dominant theme in Asia, with poor New Zealand quarterly PPI figures in Q2, a 2 year inflation expectations for Q3 of 2.23 vs +2.36% prior, and downgrades on the country's economic forecasts, this latter being the main catalyst, sending the NZD/USD to a session low of 0.8425.

Among the most relevant headlines published by the NZ Treasury Deartment, we learnt a new 2014/15 surplus forecast of NZ$297m vs. NZ$372m, while the 2015/16 surplus forecast was also cut to NZ$ 818m from $NZ 1.26bn. The 2014-15 growth forecast was also reduced to 3.6% vs 4%, and to 2.6% in 2015-16.

AUD/NZD was also one of the main focal points, breaking a key resistance level at 1.1050, leading to a new 2014 high at 1.1070. As Sean Lee, Founder at FXWW, noted, "the pair is threatening to break cleanly above important technical resistance levels and it seems that the market is now betting on a bearish outcome from the dairy auction."

That dairy auction Sean mentions is a key event to pay attention to, as it will likely result in a pick up of flows when results are published at 12 GMT later today.

Peter Fell, Analyst at FXBeat, notes: "The two week global dairy auctions at 12 GMT will likely see a greater movement, another material fall in dairy prices would put more added downward pressure, although, I am beginning to wonder, how much has already been priced in."

The rest of G10 currencies were little changed, with the AUD/USD pressing into new highs (0.9340-45) following an uneventful RBA minutes, which was seen as slightly positive for the AUD given the fact that the RBA did not step up its rhetoric against the Aussie nor provided any new policy update that could be interpreted as an excuse to push the currency lower. EUR/USD was slightly lower at 1.3355-60, with option strikes reportedly defending the downside, while GBP/USD was unmoved around 1.6720 ahead of UK inflation data.

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