SYDNEY/WELLINGTON: The Australian and New Zealand dollars were firm on Tuesday after Australia's central bank left interest rates unchanged, reiterating its outlook was for a period of steady policy.
The Aussie briefly rose to $0.9318 when the Reserve Bank of Australia (RBA) held off from grumbling over the currency's strength, but it quickly faded back to $0.9275.
The Aussie has gained 4 percent so far this year.
The central bank kept its main cash rate at a record low of 2.5 percent on Tuesday as widely expected, noting improvements in consumer demand, housing and employment.
"The RBA was slightly more positive.
It sounds more confident about the job market and said nothing new on the currency," said Sean Callow, strategist at Westpac.
"I don't see anything justifying a lower Aussie," he added, seeing the next flash point on Thursday when Australia's April jobs report is published.
The Aussie has been stuck between $0.9200 and $0.9318 for nine sessions and immediate support was found at $0.9252, Monday's low. Resistance was seen at a key retracement level of $0.9332.
Interbank futures showed little reaction to the RBA as the market had seen no chance of a cut this week and has priced in only a small probability of a rate rise late this year. Australian government bond futures rose, with the three-year contract hitting a one-month peak of 97.140.
The 10-year contract added 2 ticks to 96.155, near seven-month highs. A break above 96.190 would take it to the highest since August.
Against the yen, the Aussie bounced off a five-week low of 94.22 to last trade at 94.65. It was inching closer to a peak of 96.52 yen touched last month.
The New Zealand dollar poked up to a one-month high of $0.8715, marking five straight sessions of gains, to be last at $0.8697.
It also reached a one-month high against the yen and a three-week peak on the euro.
Against a currency basket, the kiwi rose to 80.70, closing in on a post-float high around 81.00 hit last month.
New Zealand employment data on Wednesday could further boost the kiwi if the jobless rate edges lower. Economists forecast a fall to 5.9 percent in the first quarter, which would reinforce expectations that the Reserve Bank of New Zealand will continue to raise interest rates at its meeting next month.
A strong jobs figure could push the kiwi into the $0.8700 region and test a 2-1/2-year high of $0.8746 hit last month.
One potential risk was prices for dairy products, New Zealand's largest export earner, which have fallen nearly 20 percent so far this year.
The country's major producer, Fonterra, holds a regular auction later on Tuesday and a further drop in prices could undermine the kiwi.
Reserve Bank of New Zealand Governor Graeme Wheeler on Wednesday gives a speech on the importance of the dairy industry and markets will be sensitive to any comment about the strength of the kiwi currency.
New Zealand government bonds inched lower, nudging yields a basis point higher across the board.
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