SYDNEY/WELLINGTON: The Australian and New Zealand dollars slipped against the US dollar on Tuesday, and ran into profit-taking on the yen as a two-percent gain in one week left the currencies ripe for a small correction.
The Aussie dipped to $1.0477, from $1.0504 early, as it met technical resistance, but remained within striking distance of a three-month peak of $1.0585 hit in December.
"We have been struggling in the past three days above $1.0500 where there are heavy sellers," said a trader at a European bank in Singapore, seeing the Aussie ranging between $1.0450 and $1.0550 in the next few days.
He cited buyers at $1.0450, with resistance seen at last week's high of $1.0527.
The local currency was also held back after Australia's trade deficit widened to its largest in five years as imports again outpaced exports. The deficit grew to A$2.6 billion versus forecasts of A$2.3 billion, representing the 11th straight month of shortfalls.
Yet, the recent meteoric rise in commodity prices suggests the worst of the trade pain is over for the resource-rich nation.
Prices for iron ore, a major Australian export, have edged up to a fresh 15-month high of $153.90 a tonne, a move that has been underpinning the Aussie dollar.
The need to offset the drag from trade last year was a major reason the Reserve Bank of Australia (RBA) cut rates in October and December, matching the record lows of 3 percent set during the global financial crisis.
Markets suspect rates might still ease further, but perhaps not by much should iron ore prices hold their gains and the Chinese economy continue to improve.
Interbank futures now imply rates could bottom around 2.75 percent by April, up from a previous target of 2.5 percent. Swap rates put a 38 percent probability on a cut at the RBA's next policy meeting on Feb. 5.
The New Zealand dollar edged lower to $0.8359, from $0.8370 early, but remained within sight of a 15-month peak of $0.8477 last month.
The currency has been a major beneficiary of a global yield hunt with relatively high interest rates compared with the rest of the world.
"Market speculation is that it was real money allocating into NZ assets, which fits with our long held view of the attraction of NZ assets from both a yield and stability perspective," said ANZ strategist Carrick Lucas.
Technically, the kiwi was seen ranging between $0.8323, a 21-DMA and also a Jan 4 high, and $0.8375, a Jan 2 high.
The Antipodean currencies backed off four-year highs versus the yen as investors trimmed long positions.
Both the Aussie and kiwi gained nearly 10 percent in just two months on speculation that the Bank of Japan will soon implement aggressive monetary easing measures to boost its ailing economy.
The Aussie eased 0.4 percent on the day to 91.68 yen, from a peak of 92.83, its highest since September 2008. Likewise, the kiwi slipped 0.5 percent to 73.10 yen, from 73.54.
New Zealand government bonds rose in price, nudging yields down as much as 6 basis points.
Australian government bond futures were a touch firmer, but still stood near multi-month lows. The three-year contract was up 0.1 points to 97.190, while the 10-year contract also added 0.01 points to 96.600.
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