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Australia, NZ dlrs underwhelmed by mixed China data, cautious RBA

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By Wayne Cole and Charlotte GreenfieldSYDNEY/WELLINGTON | Tuesday, Apr 17 2018 IST
The Australian and New Zealand dollars flatlined on Tuesday as the latest batch of Chinese data proved frustratingly mixed, though the world second's largest economy did manage to pip forecasts for growth in the first quarter.

The Aussie dollar was 0.2 percent lower at $0.7764, after earlier running into resistance at $0.7787.

The currency continued to benefit from generalised softness in its U.S. counterpart, but needs to clear the 200-day moving average at $.7815 to turn the technical outlook bullish.

Hopes that Chinese data might provide some momentum proved misplaced. While economic growth and retail sales just beat forecasts, misses for industrial output and fixed asset investment limited the market reaction.

At home, minutes of the Reserve Bank of Australia's (RBA) latest policy meeting only served to underline how little chance there was of an interest rate rise anytime soon.

While the Board agreed the next move in rates was more likely to be up than down, it saw "no strong case" for a move in the near term even as it notched up the longest period without a change in modern history.

"The RBA continues to reinforce the point that only a gradual pick up in wages and inflation is expected," said Belinda Allen, a senior economist at CBA.

"While this is the case no near-term adjustment in monetary policy is needed nor should be expected."Indeed, the futures market has been steadily pushing out the likely timing of a hike. A move by December is put at only a 30 percent chance, and a rise to 1.75 percent is not fully priced until June next year.

That steady outlook has allowed local bond yields to remain low even as benchmark yields in the United States have pushed higher. Yields on Australian two-year government debt are trading 25 basis points below Treasuries, levels not seen since the turn of the century.

The New Zealand dollar was a fraction lower at $0.7350, just under a recent two-month peak of $0.7395.

"The kiwi held in a reasonably tight range overnight, as it awaits the next catalyst for direction...We are still of the mind that any further NZD strength should be faded," ANZ economists said in a research note.

A dairy auction scheduled for midnight on Tuesday could weigh on the kiwi if it showed prices for New Zealand's main export earner had eased due to rising global supply.

New Zealand government bonds eased, sending yields 0.5 basis points higher along the curve.

Australian government bond futures dipped, with the three-year bond contract off 2 ticks at 97.740. The 10-year contract eased 1.5 ticks to 97.2300.

REUTERS SV 1015

-- (Reuters) -- C-1-1-DL0103-1330924.Xml

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