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Australia dollar aided by the RBA, NZ dollar at 6-month lows
[SYDNEY] The Australian dollar inched higher on Tuesday following four straight days of losses, after the country's central bank indicated it was done cutting interest rates for now.
The Australian dollar was up 0.14 per cent at US$0.7253 but still near 6-1/2-month lows of US$0.7241 touched earlier. The Aussie has shed all of its gains this year after being 6.5 per cent higher in early November.
The Aussie has been on a downward trend since Donald Trump won the US presidential election last month as his policies are widely seen as inflationary.
The Federal Reserve increased interest rates last week while signalling a faster pace of hikes next year, sending both Treasury yields and the greenback soaring.
Minutes of the Reserve Bank of Australia's (RBA) December meeting on Tuesday showed the board was trying to balance the benefits of easy policy against the risks of encouraging a renewed borrowing binge by heavily indebted households.
"I think this observation, which figures so prominently in the minutes, is signalling that the hurdle to even lower rates which would be aimed at boosting demand is very high," said Westpac economist Bill Evans.
"With housing markets in the southeast remaining vibrant, the risks of further cutting rates appear to be quite concerning for the Board." Interbank futures imply the market sees scant chance of another cut in rates.
The Aussie did well against its New Zealand counterpart , rising 0.1 per cent, although the cross has been trapped in a tight band.
It climbed on the yen after the Bank of Japan maintained its aggressive asset buying campaign which has acted to keep short-term yields deep in negative territory.
The New Zealand dollar slipped for a fifth straight day to a six-month low of US$0.6923.
The antipodean currencies were also on the backfoot following attacks in Germany and Turkey at a time when investors are less likely to want to take risks heading into the Christmas holiday season.
"Momentum remains negative, thanks to the post-Fed surge in the US dollar last week, with the next major multi-day target around the 0.6800 area," Westpac's currency strategist Imre Speizer said.
New Zealand government bonds gained, sending yields 4 basis points lower at the long end of the curve.
Australian government bond futures were mixed, with the three-year bond contract up 1 tick at 97.95 and the 10-year contract up 2.5 ticks at 97.125.