The Australian and New Zealand dollars fell on Tuesday as their US peer staged a broad rebound on improving risk sentiment after Hurricane Irma was downgraded without causing as much damage as feared. The Australian dollar slipped 0.29 percent to $0.8006 for its second straight session of losses. It had climbed to a more than 2-1/2 year high of $0.8125 last week.
The New Zealand dollar stood at $0.7250, coming off a one-month peak of $0.7338 touched on Friday. Investors had shorted the greenback for the Japanese yen last week on fears about damage to life and property in Florida from Irma, and ahead of North Korea's founding day on September 9.
But Pyongyang marked the anniversary without further missile or nuclear tests and Irma, while hitting heavily populated areas in Florida over the weekend, lost strength and was downgraded to a tropical storm. The Aussie is up 0.7 percent so far in September, largely due to losses in the US dollar. For the year, it is up 11.1 percent, on track for its best annual performance since a 14 percent gain in 2010.
The kiwi also bounced somewhat in September, after falling 4.4 percent in August for its worst monthly performance since January 2016. New Zealand government bonds slipped, sending yields 2 basis points higher at the long end of the curve. Australian government bond futures fell too, with the three-year bond contract down 1 tick at 98.000. The 10-year contract slipped 2.75 ticks to 97.37.
"There is no doubt that sentiment has picked-up and implied volatility has moved lower with a certain calmness returning to markets," said Chris Weston, Melbourne-based chief market strategist at IG. "AUD/USD is also on the radar, as this pair is over-owned in a huge way... with the pair moving into the lower 80c level and the probability that a short-term move into $0.7950 to $0.7900 looks ominous."
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