Australian dollar near 1-week lows on RBA hangover

[SYDNEY] The Australian dollar huddled near one-week lows on Wednesday with bulls still upset the country's central bank had resisted pressure to turn hawkish on interest rates.

The Australian dollar was at US$0.7618, not far from a low of US$0.7591 hit just after the Reserve Bank of Australia (RBA) ended its Tuesday meeting with rates unchanged at a record low 1.50 per cent.

Investors had bid the currency up on speculation the central bank would hint at policy tightening like its counterparts in Europe and Canada. But the RBA stayed resolute to its balanced view on both rates and economic growth.

"The RBA are blatantly neutral. So neutral they're wearing beige jackets," said Jarrod Kerr, currency strategist at Commonwealth Bank. "The statement was as neutral as neutral gets on a neutral day, spray-painted with neutral tones. The AUD lost significant ground post-RBA. There's no doubt the RBA would have been cognizant of the risk of currency strength from sounding too upbeat."

Concerns about rising tensions between the United States and North Korea also knocked the currency after Pyongyang said it had conducted a test of a newly developed intercontinental ballistic missile.

The Aussie came off a 3-1/2 month high on the yen as the Japanese currency tends to be favoured at times of heightened global uncertainty.

The New Zealand dollar was largely treading water at US$0.7286, just below five-month highs hit the previous week.

Investors shrugged off a mixed report from a fortnightly global dairy auction that showed average dairy prices inched lower, but whole milk powder, a key New Zealand export, rose.

Technical analysts say the next big level for the kiwi is US$0.7347, a barrier it has failed to break over the past couple of weeks.

"Early signs a correction of the rally since mid-May has started. If so, it could slip further to 0.7205 during the next few days," said Imre Speizer, Westpac markets strategist.

New Zealand government bonds gained, sending yields 3.5 basis points lower at the long end of the curve.

Australian government bond futures fell, with the three-year bond contract down 3 ticks at 98.040. The 10-year contract slipped 1 tick to 97.3700.

REUTERS