[SYDNEY] The Australian and New Zealand dollars edged higher on Wednesday as some semblance of calm returned to global markets after the havoc of the Brexit vote, while bond yields held near record lows on expectations of further cuts in interest rates.
The Australian dollar inched ahead to US$0.7408 and further away from Friday's trough at US$0.7305, though it remained well short of the recent US$0.7617 peak.
Chart resistance was layered at US$0.7460 and US$0.7500 and could well restrain further gains ahead of a policy meeting by the Reserve Bank of Australia (RBA) next week.
Analysts doubt the central bank would cut rates while the economic impact of the British vote is so uncertain, there was a chance it might re-instate a clear easing bias in its post-meeting statement on July 5.
Interbank futures imply around a 12 per cent probability of a quarter point cut in the 1.75 per cent cash rate next week, but that rises to 66 per cent for August.
Likewise, the Reserve Bank of New Zealand released its annual statement of intent on Wednesday in which it reiterated that further easing could still be required.
That limited the kiwi's bounce to US$0.7076, from US$0.7042 late Tuesday.
"The uncertainty generated by Brexit plus further RBNZ easing should be negative for the NZD," said Westpac analyst Imre Speizer in a research note, adding that they were targeting a move to the US$0.6500 level.
All the talk of rate cuts coupled with plunging yields abroad kept local bonds well supported.
Australia's 10-year bond yield of 2.01 per cent looked positively sumptuous compared to the -26 basis points offered by German paper.
In Japan, the entire curve out to 40 years now paid less than 10 basis points, suggesting Japanese investors would likely remain buyers of Australian and New Zealand debt.
Australian bond futures ran into some profit-taking with the three-year contract off five ticks at 98.490. The 10-year bond future eased four ticks to 97.970.
New Zealand government bonds eased, sending yields one basis point higher at the long end of the curve.