WELLINGTON/SYDNEY: The Australian and New Zealand dollars eased on Monday, with the kiwi retreating from a near three-year peak while caution ahead of an interest rate decision this week kept the Aussie pinned down.
The Aussie dipped 0.1 percent to $0.9416, having traded in a slim 0.9409-9425 range so far. It remained capped at $0.9445, a two-month high set on June 23 and its 2014 peak of $0.9461.
The kiwi slipped 0.4 percent to $0.8747, unwinding some of last week's impressive 0.9 percent rally, after data showed a slide in domestic business confidence.
A monthly Treasury report saying the country's terms of trade likely peaked in the first quarter did not help either.
The figures took some of the shine off New Zealand's outperforming economy, but the kiwi remained within reach of Friday's peak of $0.8795, a high not seen since August 2011.
Both Antipodean currencies had benefited from a broadly weaker US dollar last week after a string of disappointing US data soured sentiment for the greenback.
The Reserve Bank of Australia's (RBA) policy decision on Tuesday will be key to the Aussie's short-term outlook.
While the RBA is expected to keep interest rates steady, the focus will be on whether it will renew its efforts to talk down the stubbornly high currency.
"There is some discomfort on the part of the RBA with the exchange rate at the current high levels and our strategists believe there may be some risk of additional rhetoric in expression of this concern," analysts at Nomura wrote in a note to clients.
The kiwi's pull-back on Monday was broad and pushed it to 81.16 on a trade weighted basis from a post-float high around 81.71 hit on Friday.
It was stung by data showing a net 42.8 percent of businesses expected the economy to improve over the next year, down from 53.5 percent last month.
Traders said the reading prompted some investors to book profits on the kiwi, which has gained roughly 3 percent versus the greenback this month.
Market participants still see room for the kiwi to test a post-float high of $0.8840, as the Reserve Bank of New Zealand is widely expected to raise its official lending rate to 3.5 percent next month to quell inflation risks.
While the RBNZ is seen raising rates gradually over the next two years, the Federal Reserve is likely to keep rates around zero until well into next year.
This week sees major US economic releases including non-farm payrolls, and ANZ analysts said any disappointment could be the catalyst for a test of $0.8842, a level last hit in August 2011.
Traders said kiwi bids had been filled at $0.8750, while more were seen at $0.8725 and $0.8700. Initial offers above $0.8800 were providing resistance. New Zealand government bonds were little changed.
After last week's rally, Australian bond futures were flat. The 10-year contract stood within a hair's breadth of a one-year high of 96.470 set on Friday. The three-year was at 97.320, not far from Friday's 10-month high of 97.340.
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