SYDNEY: The Australian dollar lost some altitude on Monday after disappointing data reinforced the case for the central bank to stay on the sidelines for some time, dragging the New Zealand dollar lower in thinned markets.
The Aussie slipped a quarter of a US cent to $0.9271 after figures showed Australian building approvals fell 5.6 percent in April versus forecasts of a rise of 1.8 percent.
"It shows the Aussie has run out of momentum as it has failed to break above the $0.9310/20 area," said a trader at a European bank in Singapore. He sees the Aussie hovering around $0.9250 in a thinner than usual trading environment.
Markets in New Zealand, China and Hong Kong were closed on Monday for a public holiday. "The lack of follow-up in early trade to good China data over the weekend is an indication the Aussie looks capped," the same trader added.
China's factory activity expanded at the fastest pace in five months in May, data showed on Sunday, reinforcing views that the economy is regaining momentum.
The Australian dollar is usually sensitive to news out of China, Australia's top export market.
Support was seen around $0.9210, with resistance at $0.9360. It touched a high of $0.9410 last month and is up more than 4 percent this year.
Other Australian data out on Monday included a drop of 1.7 percent in business inventories in the first quarter, while inflation edged up in May.
A private gauge of inflation rose 0.3 percent, pushing the annual pace up to 2.9 percent, near the top end of the Reserve Bank of Australia's (RBA) 2-3 percent target band.
The central bank is currently not too worried about price pressure, believing that moderate growth in labour costs will help keep a lid on overall inflation.
The RBA is widely expected to hold the cash rate at a record low of 2.5 percent at its monthly policy meeting Tuesday, making nine months since it last cut.
Markets are pricing in almost no chance of a further easing and see the prospect of steady rates in the year ahead. The Australian dollar faded a little against its kiwi counterpart at NZ$1.0938, but remained close to NZ$1.0982 touched last week, a peak not seen since December.
The New Zealand dollar eased to $0.8476 from $0.8494 in New York Friday, pulling closer to a near four-month low of $0.8451 touched last week. The currency was weighed by a recent patch of softer data and expectations the central bank will ease up on its planned rate tightening.
On a trade-weighted basis, the kiwi skidded to 79, its lowest since March.
Australian government bond futures retreated further from multi-month peaks, with the three-year bond contract down one tick at 97.220.
The 10-year contract eased 3 ticks to 96.325, having touched a 10-month high of 96.405 last week.
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