SYDNEY/WELLINGTON: The New Zealand and Australia dollars took a breather on Tuesday following recent hefty gains with uncertainty about the next move by central banks in the US, Europe and Australia weighing on sentiment.
The New Zealand dollar was hit the most, showing a 0.6 percent loss against the US dollar, euro and yen.
It slipped 0.6 percent to $0.8323 as investors booked profits following a climb to a 4-1/2-month high of $0.8445 on Monday. The kiwi has gained 7.6 percent so far this month and if sustained, it would be the largest increase since 2009.
"It looks like a risk-off trade day," said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore, seeing no clear catalyst for the move.
Some dealers blamed uncertainty about when the Federal Reserve will start trimming its massive stimulus, while dovish remarks by the European central bank reminded investors of that region's economic weakness.
Still, on a trade-weighted basis the kiwi remained firm overall at 77.60. It touched 78.09 last week, its highest since early May, after the Federal Reserve stunned markets by keeping its massive asset-buying programme intact.
Many in the market believe the Fed stimulus drive, along with expectations for a rise in New Zealand interest rates next year, should support the currency in a $0.8000-$0.8400 range through year-end.
Short-term resistance was found at $0.8340, while strong support was seen at $0.8292, the 61.8 percent retracement of its April-August sell-off.
The Aussie held its breath at $0.9406, having met strong resistance above $0.9500, a level it broke but was unable to maintain twice last week.
The Aussie was weighed by Aussie-yen selling as investors squared up positions with the end of the quarter looming.
It fetched 92.76, having climbed to 94.45 last week, its highest in nearly four months. Support was found around $0.9395 and a break under would target $0.9370.
Resistance was seen at the session peak of $0.9428, ahead of $0.9530, a three-month high set last week.
Not helping was increased speculation the Reserve Bank of Australia (RBA) will be forced to cut interest rates in order to keep a cap on the currency.
Interbank futures imply around a 50-50 chance of a move by year end Swap markets are pricing in around 5 basis points of an easing on a 12-month horizon, having factored in a chance of a tightening as recently as last week.
Australian government bond futures edged up with the three-year bond contract adding 6 ticks to 97.050. The 10-year contract gained 7.5 ticks to 96.045. New Zealand government bonds rose, pushing yields as much as 5 basis points lower at the long end of the curve.
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