By Cecile Lefort and Charlotte Greenfield
SYDNEY/WELLINGTON, Feb 23 (Reuters) - The Australian dollar lost some ground on Thursday after a surprisingly sharp fall in business spending last quarter offered speculators an excuse to short the currency, dragging the New Zealand dollar lower.
The Australian dollar AUD=D4 dropped around a fifth of a U.S. cent to $0.7672, from Wednesday's high of $0.7714 and away from a recent three-month peak of $0.7732.
Since November, there has been a wall of resistance around $0.7707-$0.7778.
The setback came after data showed Australian business investment fell 2.1 percent last quarter, when analysts had looked for a drop of 1 percent.
Still, firms did upgrade spending plans for the current 2016/17 year and there were signs of a pick-up, albeit slow, in non-mining investment mixed data failed to inspire confidence as the market was looking for clearer signs of recovery following a shock contraction in economic growth in the third quarter of last year.
"I think it keeps alive the prospect for another rate cut, although the Reserve Bank has set a very high hurdle for taking rates lower," said Shane Oliver, chief economist at AMP Capital.
The Reserve Bank of Australia (RBA) holds its monthly policy meeting on March 7 and is widely expected to keep rates at a record low 1.5 percent where they have been since August.
There was also some disappointment that offshore investors only took a small portion of Wednesday's record A$11 billion sale of Australian government bonds.
Overseas investors took just 15 percent of the issue, the lowest share on record, while banks took 60 percent.
The euro managed to regain some ground, albeit very modestly, against the Aussie at A$1.3701 EURAUD=R . The euro was still within sight of a 3-year trough of A$1.3619 touched on Wednesday, having skidded 5.6 percent so far this year.
The New Zealand dollar NZD=D4 eased slightly to $0.7184, largely in sympathy with its Aussie cousin.
It had edged as high as $0.7199 earlier when the U.S. dollar took a knock from minutes of the last Federal Reserve meeting which seemed to diminish the chance of a U.S. rate hike as early as March.
New Zealand government bonds 0#NZTSY= gained, sending yields 2.5 basis points lower.
Australian government bond futures rose, with the three-year bond contract YTTc1 up 3 ticks at 97.960. The 10-year contract YTCc1 added 4 ticks to 97.1750, while the 20-year contract YXXc1 edged up 3.5 ticks to 96.5500. (Editing by Jacqueline Wong)