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Australia, NZ dollars slip as risk appetite wanes

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The Australian and New Zealand dollars fell on Tuesday as a risk-off tone dominated across financial markets amid political uncertainty in Italy and falling oil prices.

[SYDNEY] The Australian and New Zealand dollars fell on Tuesday as a risk-off tone dominated across financial markets amid political uncertainty in Italy and falling oil prices.

The Australian dollar eased below a closely-watched 20-day moving average of US$0.7526 for its third consecutive day of losses. It was last down 0.3 per cent at US$0.7520.

The New Zealand dollar was off 0.2 per cent at US$0.6932, but was still above a recent five-month trough of US$0.6851.

Risk appetite took a knock amid worries of snap polls in Italy after the anti-establishment 5-Star and League parties abandoned plans to form a government.

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Investors feared Italy's election campaign could focus on the country's continued membership of European institutions and strengthen the populist parties' hand.

Adding to the uncertainty, Spanish Prime Minister Mariano Rajoy will face a vote of confidence in his leadership on Friday.

"It is clear that the bitter political battle will continue. In this environment, uncertainty and market turbulence look set to continue," analysts at ANZ said in a note.

Against the euro, the Aussie was a tad weaker but not far from Monday's four-month high of 1.5363, while the kiwi too eased from a 1-1/2 month top.

Also weighing on the Aussie, oil prices declined sharply in recent days with US crude futures near the lowest in six weeks. Australia is a major exporter of LNG and petroleum products.

Analysts will next focus their attention on US inflation data due later in the week which could provide clues to future interest rate rises ahead of the Federal Reserve's policy meeting next month.

At home, Australia will see monthly building approvals data for April on Wednesday and figures on business investment Thursday.

In New Zealand, the central bank will release its bi-annual financial stability report at 2100 GMT Tuesday where the governor is set to flag risks to the country's economy.

New Zealand government bonds gained, sending yields 1 basis point lower towards the long end of the curve.

Australian government bond futures rose, with the three-year bond contract up 2 ticks at 97.84. The 10-year contract added 4.5 ticks to 97.285.

REUTERS