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Australia, NZ Dollars Ease as Coronavirus Headlines Dominate

SYDNEY, Dec 29 (Reuters) - The Australian and New Zealand dollars eased on Wednesday as the spread of coronavirus cases led to more restrictions globally and clouded the economic outlook, offsetting record highs on Wall Street.

The Aussie slipped back to $0.7221 , having touched a five-week peak at $0.7264 overnight before running out of steam. Support lies around $0.7196 and $0.7083, with resistance at $0.7275 and $0.7368.

The kiwi dollar dipped to $0.6794 , and was threatening immediate support around $0.6789. Major support is down at the recent 13-month low of $0.6702, while resistance lies at $0.6867.

With the domestic economic calendar blank, Omicron headlines dominated the news and they were not exactly reassuring.

Coronavirus cases have surged across most of Australia as New South Wales, Victoria and Queensland all reported record numbers on Wednesday.

State governments are vowing not to lockdown their economies though they have tightened some social restrictions and consumers have curtailed their activities a little.

Retailers are still reporting a strong shopping season, but restaurants and holiday destinations have suffered cancellations.

The explosion in cases will test the Reserve Bank of Australia's (RBA) optimism on the economy and, if sustained, could argue for an extension in its bond buying campaign when that comes up for review at the Feb. 1 board meeting.

Analysts had been generally split between those expecting the pace of bond buying to be halved to A$2 billion ($1.45 billion) a week and those looking for it to cease altogether.

Key to the decision will be the December jobs report on Jan. 20 and consumer prices for the fourth quarter on Jan. 25, both of which are expected to show high numbers.

The rapid growth in local cases put downward pressure on Australian bond yields with the 10-year the lowest in three weeks at 1.54% and just a whisker from its December trough of 1.518%.

($1 = 1.3837 Australian dollars)

Editing by Sam Holmes

Source: Reuters

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