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SYDNEY: The Australian and Kiwi dollars eased on Tuesday, weighed down by lower commodity prices, while signs the US Federal Reserve could start tapering bond purchases sooner weighed on risk-sensitive currencies.

The Australian dollar dropped 0.16% to $0.7316, as business confidence data also showed recent coronavirus curbs are taking a toll on the economy. New South Wales, the country's most populous state, reported on Tuesday its biggest daily rise of COVID-19 cases since the pandemic started.

That was the Aussie's lowest level since July 28 and near its next support test around $0.7289 - its 2021 through.

The New Zealand dollar shed 0.31% to stand at a one-week low of $0.6974, moving away from the one-month high of $0.7088 hit on Aug. 4.

Gold fell to a more than four-month low on Monday as strong US jobs data bolstered expectations for an early tapering of the Federal Reserve's economic support measures. Iron ore prices also extended losses on Tuesday.

On Monday, two Federal Reserve officials said that while the labour market still has room for improvement, inflation is already at a level that could satisfy one leg of a key test for the beginning of interest rate hikes.

A measure of Australian business conditions on Tuesday showed business confidence worsened for a second month in July as the coronavirus lockdowns took a heavy toll on service industries. The prospect of the Fed's reduced bond-buying, ongoing lockdowns in Australia to contain the Delta variant of the coronavirus, and weaker commodity prices would likely keep risk-sensitive currencies under pressure.

"With Sydney's lockdown extending to the region, the current lockdowns remain the dominant near term focus and driver of market valuations," said rate strategists at Westpac in a note.

"Price action and clearly the economic risks remain stacked to the downside."

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