SYDNEY/WELLINGTON (Reuters) - The Australian dollar stood near three-week lows on Wednesday versus a euro hoisted up by remarks from European Central Bank Governor Mario Draghi, which were seen as signalling a change in its super-easy policy stance.
The Aussie fared better against the U.S. dollar and yen - both of which saw heavy selling when Draghi said that deflationary forces had been replaced by reflationary ones.
The euro <EURAUD=> was at A$1.4916 after jumping 1.5 percent overnight. Yet against the greenback, the Aussie <AUD=> was up 0.36 percent at $0.7606.
It went as high as $0.7624 on Tuesday but once again failed to breach key chart resistance of $0.7636.
The Aussie also jumped to a near 3-month peak on the yen <AUDJPY=>, continuing its month-long uptrend.
"Draghi's observation that the supply-driven decline in oil prices is holding back core inflation, and thus something that the central bank looks through, is an important one - and hawkish," said Ladislav Jankovic, forex strategist at JP Morgan.
"It implies that low core inflation by itself will not be enough to prevent the ECB from a taper announcement in September. Separately, the comfort with the growth outlook is also emphasized."
But any change in the bank's stance, which includes sub-zero rates and massive bond purchases, should be gradual, Draghi said at an event in Portugal.
His comments sent the euro <EURNZD=> soaring 1.7 percent against the New Zealand dollar, the highest daily percentage rise in almost two years, to a two-week high of NZ$1.5616.
On the greenback, the kiwi <NZD=D4> stood at $0.7279 after touching $0.7344 - a level not seen since Feb.7.
"The NZD/USD underperformed overnight despite the USD depreciating against most in the G10. A further unwinding of long positions could see the move extend lower," said Con Williams, economist at ANZ, in a research note.
Government bonds were belted after Draghi's speech, with German two-year yields hitting their highest since last June.
New Zealand government bonds<0#NZTSY=> eased, sending yields 5 basis points higher at the long end of the curve.
Australian government bond futures fell too, with the three-year bond contract <YTTc1> off 6 ticks at 98.130. The 10-year contract <YTCc1> tumbled 7.5 ticks to 97.5250.
(Reporting by Swati Pandey and Charlotte Greenfield; Editing by Eric Meijer)
