SYDNEY/WELLINGTON: The Australian and New Zealand dollars nursed losses on Tuesday after both country's central banks complained the currencies were too high and hurting their economies.
The New Zealand dollar was hit the hardest, slipping 1 percent on the day to $0.7981 and gunning for key support at $0.7977, the 38.2 percent of the $0.7670-$0.8165 rise.
The move lower followed home lending restrictions announced by RBNZ's Chief Graeme Wheeler to help cool off an overheated market without having to raise interest rates and so push the currency even higher.
The central bank said it would limit the amount of high loan-to-value ratio lending (LVR) that banks would be able to do at no more than 10 percent of total lending.
More importantly, markets reacted to a change in rhetoric, with the RBNZ describing the kiwi as overvalued, rather than high as it had in the recent past. Wheeler also said that while a rate rise might be needed next year, it wasn't needed now.
"This, to us, appears to be somewhat backtracking from the July communique's shift towards a more hawkish stance," said Alvin Pontoh, a strategist at TD Securities in Singapore, still seeing a rate hike in March 2014.
Bank bills rose up to 7 ticks as the market priced in a slightly less aggressive tightening campaign.
In Australia, the Aussie slipped to $0.9087, well away from a three-week peak of $0.9234 on Monday. It extended losses after minutes of the RBA's last policy meeting was seen as dovish.
"The minutes indicate that the RBA retains a moderate easing bias. But another rate cut is not 'imminent'," said Michael Workman, an economist at Commonwealth Bank of Australia.
Swap markets have slightly widened the chances of a rate cut in September, giving a 5 percent of an easing to a record low of 2.25 percent. Interbank futures imply around a 64 percent chance of a cut by year-end.
The Antipodean currencies had already been under pressure after the Brazilian real, Indian rupee and Indonesian rupiah skidded to multi-year lows on Monday, while copper, oil and stocks also fell.
The Aussie is often used as a liquid proxy to hedge against weakness in emerging markets.
Key support for the Aussie was found around $0.9040-55.
New Zealand government bonds rose, sending yields 4.5 basis points lower along the curve.
Australian government bond futures recouped early losses. The three-year bond contract added 1 tick to 97.180, and up from a six-week low.
The 10-year contract gained 1.5 ticks to 96.990, having touched 95.935, its lowest since late June. A break below 95.845 would take it to 18-month lows.
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