WELLINGTON/SYDNEY, Feb 21 (Reuters) - The New Zealand and Australian dollars were sharply lower on Thursday as talk swirled a hedge fund was having to liquidate positions in commodities, sending gold, equities and resource-linked currencies into a spin.
* The New Zealand dollar one of the worst performers, falling 1.4 pct to $0.8346, from $0.8393 in late Wednesday local trade.
* Kiwi had already been battered from $0.8460 after Reserve Bank of New Zealand Governor Graeme Wheeler said the currency was significantly overvalued and the bank could intervene if the conditions were right, but in the end there were no quick fixes to lowering the exchange rate.
* Kiwi's fall has cleaned out some extended long positions, but support seen at $0.8334, the Feb 12 low, and below that around $0.8300, with $0.8390 likely to cap the topside.
* The Aussie slides 1 pct to $1.0245, from $1.0355 late Wednesday, and in sight of last week's four-month low of $1.0227. Resistance at the 200-day moving average at $1.0323.
* Gold tumbled 2.5 pct to $1,564 an ounce mainly on widespread rumours a large commodity hedge fund was being forced to liquidate its holdings, triggering a broad sell-off in other industrial commodities led by crude oil.
* In contrast, iron ore prices extended their climb to reach a 14-month high at $158.90 a tonne. The steel making mineral is Australia's single biggest export earner.
* The U.S. dollar got a further fillip later when minutes of the last Federal Reserve meeting showed some members wanted to scale back bond buying before seeing a pickup in hiring.
* However, analysts cautioned the reaction was overdone as the hawks were still a minority in the Fed and the more important board members, including Bernanke and Yellen, remained firmly committed to QE. [ID:nL1N0BK92R}
* Against the yen the Aussie down 0.9 percent to 96.00 yen and the kiwi 1.3 percent down at 78.10 yen .
* The euro also gains, up 0.3 percent at A$1.2962, and 0.8 percent on the kiwi at NZ$1.5933. Even battered sterling makes ground on kiwi up 0.4 percent at NZ$1.8288.
* Aussie manages to rise to a 10-day high on the kiwi, rising to NZ$1.2289 from a low of NZ$1.2211.
* RBNZ Governor Wheeler's speech sees investors scale back the expected speed and scale of any NZ rate tightening with 28 basis points of rises seen over the next 12 months, from 37 basis points before the speech.
* In Australia, the market implies a one-in-four chance of a rate cut at the RBA's next meeting in March, though interbank futures remain fully priced for an easing to a record low of 2.75 percent by June.
* Data calendar light in both Australia and New Zealand. RBA Governor Glenn Stevens appears before a parliamentary committee on Friday.
* Australian government bond futures gain with the three-year contract up 0.04 points at 97.130, while the 10-year contract bounces off a 10-month low to be up 0.03 points to 96.470.
* New Zealand government bonds with bid tone, which sends yields up to 3 basis points lower.
(Australia and New Zealand bureaux) Keywords: MARKETS AUSTRALIA NEWZEALAND/FOREX
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