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aussieSYDNEY: The Australian and New Zealand dollars climbed off multi-week lows against the greenback on Tuesday, lifted by a firmer euro and a rebound in Chinese stocks.

The Aussie advanced to $1.0610 from $1.0584 in New York, pulling off a four-week low after short sellers were squeezed by demand from Asian central banks, traders said.

Earlier, the currency touched a session low of $1.0534 after minutes of the Reserve Bank of Australia's (RBA) May policy meeting did little to boost market expectations of an imminent rate hike.

The minutes said the RBA, which kept rates unchanged at 4.75 percent in May, would tighten at some point to keep a lid on inflation.

Markets have cut the risk of a June rate hike to a mere 14 percent from 20 percent earlier in the day, while interbank futures imply a 65 percent chance of a 25 basis point rate hike in August.

However, some analysts thought the RBA minutes were in line with the hawkish tone seen in its May quarterly policy statement.

"Whenever the RBA feels it needs to do something, it tends to do it now rather than later," said Gavin Stacey, head of Australia and New Zealand research at Barclays Capital.

He added "an imminent hike is on the cards" and forecast a 25bp-rate hike as early as June. He anticipated the Aussie to pull back up towards its 29-year peak of $1.1012 in the next week or so.

The Aussie has fallen around 4 percent from a 29-year peak of $1.1012 on May 2 following a correction in some commodity prices. Support is seen at $1.0490 with resistance at around $1.0716, the May 13 intraday.

"There is a feeling that oil, commodities and the euro may been sold down too much and maybe preparing to correct higher, and the Aussie would be the first to benefit," a trader said.

Chinese shares rose as bargain-hunters sought battered down counters in the energy sector that bore the brunt of volatility in commodities prices over the past two weeks.

The New Zealand dollar clawed its way back to $0.7823, little changed from late New York levels.

It had dipped to a one-month low of $0.7755 in Monday's offshore session as it broke through chart support at $0.7820 amid increased uncertainty over the global outlook.

"Offshore developments are likely to determine the oscillations which should remain capped closer to resistance," ANZ-National Bank said in a market note.

Near term support for the kiwi is seen initially at $0.7755 and then just above $0.7700, while $0.7836 and then $0.7885 are seen as upside hurdles.

New Zealand-based dairy giant Fonterra's two-weekly auction will be released on Wednesday morning and given the sector's importance to the economy has the ability to move the kiwi.

Recent auctions have seen prices elevated but off their highs, markets showed caution ahead of the budget on Thursday, in which the government will move to contain spending and reduce its ballooning debt burden to stave off a ratings downgrade.

The Aussie edged higher against the kiwi to NZ$1.3555 from NZ$1.3520 after the RBA minutes once again highlighted the divergent growth and interest rate outlooks for the two neighbours.

The euro recouped some this month's losses against the Antipodeans, though it remained vulnerable to persistent worries about the euro zone debt.

The single currency nudged up to NZ$1.8122, well off a three-month trough of NZ$1.7847 struck offshore, while it traded at around A$1.3361 , well-off a 4-month low of $1.3220 plumbed on May 11.

NZ government debt prices edge higher in subdued trade, while Australian bond futures eased with the three-year down 0.04 points at 94.920 and the 10-year contract down 0.055 points at 94.610.

           

Copyright Reuters, 2011

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