SYDNEY/WELLINGTON: The Australian and New Zealand dollars kept offshore gains on Tuesday after upbeat global factory data lifted market sentiment, though trading was cautious ahead of an interest rate decision in Australia.
The Reserve Bank of Australia (RBA) holds its monthly policy meeting at 0430 GMT and is widely expected to keep rates steady ahead of a federal election due on Saturday.
Investors will be scrutinising the central bank's short statement after the decision for any hint of further easing after it cut rates to a record low of 2.5 percent in August.
"Markets will watch any comments on how the RBA views certain sectors of the economy," said a trader at a European Bank in Singapore.
"If the RBA recognises some areas like home sales are buoyant, it would reiterate my view that they are happy with rates at 2.5 percent and done with easing this year."
The Aussie was firm at $0.9000, having climbed as high as $0.9026, before losing ground on weaker-than-expected retail sales for July and a wider-than-anticipated current account deficit.
Resistance was found at $0.9025, the 38.2 percent retracement of the $0.8848-$0.9320 fall, with support at Monday's low of $0.8924.
The Antipodean currencies found support after a string of upbeat factory data around the globe boosted shares and most commodities.
The New Zealand dollar rose half a percent to a two-week high of 78.05 yen versus a broadly weaker Japanese currency, which suffered as investors trimmed safe-haven bets in favour of the yen. It also climbed to a two-week high against the euro.
The kiwi traded at $0.7820, barely moved on the day but holding near an intraday high of $0.7837 hit in offshore trade. Investors were wary of pushing the currency much higher ahead of the RBA decision.
Against the Aussie, the kiwi sat tight around NZ$1.1500 as the Aussie held near lows around NZ$1.1255 hit last month when investors began to temper expectations for a strong easing bias from the RBA.
Market participants, expecting the RBA to cut interest rates further later this year, believe that the Aussie could fall back towards NZ$1.1300 if the central bank steps up its easing rhetoric later in the day.
Against the dollar, the kiwi saw technical support at $0.7825, the 23.6 percent retracement of its downward move in late August, while resistance was seen above $0.7860, where offers were suspected.
New Zealand government bonds were lower, sending yields as much as 6.5 basis points higher at the end of the curve.
Australian government bond futures eased with the three-year bond contract down 2 ticks to 97.170. The 10-year contract retreated 1 tick to 96.035.
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