SYDNEY, July 6 (Reuters) - The Australian and New Zealand dollars fell on Wednesday as Brexit jitters returned with a vengeance, prompting a flight to safety that drove local government bond yields to record lows.
The Aussie AUD=D4 shed 0.5 percent to $0.7425, recoiling from this week's peak of $0.7545.
The New Zealand dollar NZD=D4 was 0.8 percent lower at $0.7095, peeling away from a 1-1/2 week high of $0.7241 set on Monday.
Unsurprisingly, sterling was the worst performer among major currencies, reaching multi-year troughs below A$1.7300 AUDNZD=R and NZ$1.8100 GBPNZD=R .
Government bonds rallied sending Australia's 10-year yields AU10YT=RR to a historic low of 1.847 percent. New Zealand's 10-year yield NZ10YT=RR reached 2.240 percent, a world away from the mid-December high of 3.680 percent.
Spooking investors, three British commercial property funds worth about 10 billion pounds have been suspended as asset prices plunged following Britain's shock vote to exit the European Union.
A tumble in Italy's bank shares on Tuesday further aggravated already strained nerves. overnight shift in risk sentiment has left the Australian dollar vulnerable over the short term," said Stephen Innes, senior currency trader at OANDA Australia and Asia Pacific.