WELLINGTON/SYDNEY: The Australia and New Zealand dollars were marking time on Tuesday, with markets awaiting the outcome of the Reserve Bank of Australia's (RBA) monthly policy meeting.
The central bank is considered certain to hold rates steady at a record low of 2.5 percent, but may take the opportunity to try and talk the Aussie lower.
The local currency is up 4.5 percent so far this year.
The Australian dollar edged down to $0.9320, from $0.9331 in early trade, having bounced from a two-month low of $0.9275 set last week.
"The RBA clearly remains uncomfortable with the Aussie's behaviour," said Michael Blythe, chief economist at Commonwealth Bank of Australia. "The post meeting Statement will need a dovish slant if the RBA is keen to massage the AUD lower," he added.
The Aussie dollar initially rose after better-than-expected trade data in Australia, but fell following a soft reading of HSBC Services PMI in China.
The Aussie is sensitive to news out of China, its key export market. Still, the Aussie remained firmly stuck in the 92-95 cents range since late March.
Support was found at $0.9307 with dealers citing buyers around $0.9300. Resistance starts at $0.9335/40.
Australian government bond futures edged up from recent multi-week lows, with the three-year bond contract up 2 ticks at 97.300. The 10-year contract added 3 ticks to 96.540.
The premium offered by Australian 10-year yields over three-year bonds neared its smallest in more than a year at 75 basis points.
It was at 135 basis points early in January.
The flattening of the curve reflects in part the steady rate outlook in Australia combined with receding expectations of an earlier start to a tightening cycle by the Federal Reserve.
The New Zealand dollar was on a firmer footing at around $0.8512, as it moved further from last week's near-two month low of $0.8462.
An analyst said investors had taken profit in the US dollar after last week's payrolls data, which had helped to lift kiwi in a generally quiet market.
"It should hold in a tight range around $0.8500 which is fair for the kiwi at the moment unless there is some stunning data either way," said Bank of New Zealand's Raiko Shareef. He said a further fall in prices at dairy giant Fonterra's auction might see the currency head towards strong support at $0.8450.
"The whole way below there will be very hard to break, there's quite a lot of technical support.
I suspect there's quite a few bids scattered through that area," Shareef said.
The other major local test comes from second quarter labour market data on Wednesday. Unemployment was seen edging lower to 5.8 percent, while wage growth stayed restrained.
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