By Cecile Lefort and Rebecca Howard
SYDNEY/WELLINGTON, March 16 (Reuters) - The Australian and New Zealand dollars were nursing losses on Wednesday after renewed weakness in iron ore and dairy prices weighed on risk appetite, sending investors to the safety of the yen.
The New Zealand dollar NZD=D4 was the hardest hit after international dairy prices fell 2.9 percent at a fortnightly auction, confounding expectations for a rise and disappointing kiwi bulls. slipped to a two-week trough of $0.6577, having dropped 1.1 percent on Tuesday. Support was found at $0.6572.
The Reserve Bank of New Zealand (RBNZ) said that low global milk prices were putting significant financial pressure on the nation's dairy farms, but felt confident the banking system was robust enough to withstand a severe downturn.
Dairy represents more than 7 percent of the country's GDP and is the largest export earner.
Risk appetite had already been waning as markets waited for fresh guidance from the U.S. Federal Reserve. Even an improvement in the nation's current account deficit to NZ$2.6 billion did little to revive sentiment. safe-haven yen was the major beneficiary with the kiwi skidding more than one yen to 74.81 NZDJPY=R since Tuesday's peak. It has shed 2.4 percent so far this week, pulling closer to the 2016 low of 73.19.
The Aussie also lost ground to the yen at 84.51 AUDJPY=R , from a two-month peak of 86.40 set on Monday. Undermining the Aussie was a 6.8 percent drop in the, ever volatile, price of iron ore, Australia's top export earner.
The Aussie slipped to $0.7455 AUD=D4 , edging away from an eight-month summit just below 76 cents touched on Monday.
"The fall in the spot iron ore price is the sixth straight day of decline, more than fully unwinding the record 18.6 percent surge on 7 March," said Sean Callow, a senior strategist at Westpac.
"It is looking increasingly like AUD/USD $0.76 was too tough a nut to crack."
Support was found around $0.7440, with resistance at $0.7484.
Markets now await Fed guidance on the outlook for rate hikes and especially on the tone of Chair Janet Yellen's news conference. government bond futures edged up from multi-week lows, with the three-year bond contract YTTc1 5 ticks firmer at 97.980. The 10-year contract YTCc1 rose 2 ticks to 97.3500, while the 20-year contract YXXc1 added 2.25 ticks to 96.7950.
New Zealand government bonds 0#NZTSY= eased, sending yields 2 basis points higher at the long end of the curve. (Editing by Simon Cameron-Moore)