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  1. Australia dollar holds its nerve, gains on New Zealand dollar

Australia dollar holds its nerve, gains on New Zealand dollar

The Australian dollar held firm on Tuesday as its New Zealand counterpart took a hit when domestic data showing a slump in business confidence reinforced the likelihood of more rate cuts there.

By: | Published: June 30, 2015 8:27 AM

The Australian dollar held firm on Tuesday as its New Zealand counterpart took a hit when domestic data showing a slump in business confidence reinforced the likelihood of more rate cuts there.

The Aussie was up at $0.7674 having bounced from a low of $0.7587 on Monday, though it faced stiff resistance in the $0.7710/20 zone.

In contrast, the kiwi slipped 20 ticks to $0.6810  after a closely watched monthly business survey turned negative for the first time in four years.

The weak result added to bets the Reserve Bank of New Zealand will cut rates again at its next policy review on July 23. With Australian rates seen staying at 3 percent for the next few months, the diverging outlook nudged the Aussie up half a cent to NZ$1.1255.

The kiwi also faces another test from a dairy auction due Thursday morning. Near term support is at Monday’s five-year low of $0.6787, with resistance at the overnight high of $0.6883.

“The NZ dollar will likely struggle to find support either from the global or domestic backdrop,” said BNZ senior strategist Kimberly Martin in a note.

The Aussie has so far proved relatively resilient in the face of market concerns about Greece, in part because the uncertainty over possible default and an exit from the euro has led investors to push back the likely timing of a rate increase from the U.S. Federal Reserve.

Fed fund futures for December <0#FF:> closed at a contract high on Monday and implied a rate around 30 basis points, compared to the current effective rate of 12 basis points.

In debt markets, local bonds gave back just a little of the safe-haven gains made on Monday. Australian three-year bond futures eased 3 ticks to 97.930, while the 10-year contract dipped 2 ticks to 96.9850.

Yields on New Zealand government bonds were as much as 2.5 basis point higher.

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