By Swati Pandey
SYDNEY, Dec 20 (Reuters) - The Australian and New Zealand dollars slipped to one-week lows on the euro on Wednesday as a surge in German long-dated yields sparked a rally in the common currency, a move that also pushed local bond yields higher.
Germany, the euro zone's benchmark government bond issuer, said on Tuesday it planned to sell 16 billion euros ($19 bln) of 30-year Bunds, up from around 11 billion euros in 2017. That was the only section of the curve where supply is expected to rise in 2018. response, long-dated Bund yields jumped and sparked a global curve steepening.
Yields on Australian 30-year bonds AU30YT=RR jumped to a level not seen since mid-November, while those on the 10-year paper AU10YT=RR rose to a 1-1/2 month top.
The Bund sell-off sent the euro higher across the board.
Against the Australian dollar EURAUD=R , the single currency climbed 0.1 percent to A$1.5452, adding to a 0.5 percent gain on Tuesday.
Against the New Zealand dollar, the euro held near its highest since mid-December after rising 0.8 percent the previous session.
The Aussie fared better on the U.S. dollar. It held at $0.7662, not too far from a recent two-month top of $0.7694 touched last week. AUD=D4
The greenback did get a nudge higher after the U.S. House of Representatives approved a long-awaited tax bill, but forex traders were not as excited as their equity counterparts on doubts over whether the tax cuts would really boost U.S. growth.
The New Zealand dollar NZD=D4 hit a one-week low of $0.6966 against its U.S. counterpart after dairy prices fell overnight in a global auction, confounding expectations for a rise.
Dairy is New Zealand's top export earner.
"Dairy prices have ended 2017 on a weak note," according to ASB Economics. "Overall prices are down 13.2 percent over the year."
"From here, we anticipate that butter and general dairy prices will stabilise... given the magnitude of the price falls we expect that (stabilisation) will occur in early 2018."
Data out on Wednesday showed New Zealand's current account deficit narrowed slightly in the year to September with the goods trade deficit the smallest in three years.
New Zealand government bonds 0#NZTSY= slipped, sending yields about 3 basis points higher on the long-end of the curve.
Australian government bond futures eased too, with the three-year bond contract YTTc1 down 3 ticks at 97.845. The 10-year contract YTCc1 fell 6 ticks to 97.3350. ($1 = 0.8446 euros) (Editing by Shri Navaratnam)