The Australian dollar edged lower on Tuesday after a survey on domestic business conditions disappointed, while its New Zealand cousin remained on the defensive ahead of an expected hike in US interest rates this week. Economic data out of China was too mixed to provide much direction, with investment outpacing forecasts even as retail sales undershot. The Australian dollar was off 0.1 percent at $0.7558 in lacklustre trade, but avoided another test of the recent seven-week low of $0.7491.
The currency took a dip after a local measure of business conditions fell from decade highs in February as sales unwound some surprisingly strong gains the month before, though activity remained above average across most sectors. The New Zealand dollar was holding steady at $0.6918, after failing to break above resistance around $0.6950 overnight. Support lies at the recent two-month trough of $0.6890, and a break there would set up a test of the December low at $0.6863.
Yields on Australian 10-year government debt eased a touch to 2.95 percent after hitting the highest since late 2015 last week at 2.988 percent. Australian government bond futures edged up, with the 10-year contract 2.5 ticks firmer at 97.0350. The three-year bond contract was flat at 97.850. New Zealand government bonds were little changed. National Australia Bank's monthly index of business conditions dropped 7 points to +9 in February, but stayed above the long-run average of +5.
The survey was solid enough to suggest there was scant risk of a cut in interest rates ahead, with the Reserve Bank of Australia (RBA) more concerned about cooling a debt-fuelled spike in home prices. The head of the central bank's financial division on Tuesday hinted regulators were looking at further toughening rules on bank lending for property investment to head off risks in the market.
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