The Australian dollar nudged up against the US dollar on Tuesday, drawing support from carry trades as investors continued to be attracted to higher-yielding currencies. The Aussie also hovered near 16-year highs against the Japanese yen, which has taken a battering in recent sessions on a view that interest there are unlikely to rise in a hurry.
The local unit had slipped to around 84 cents in offshore trade, but quicky rebounded as buying emerged at lower levels. "Any weakness for the Aussie has been short-lived and shallow," said Tony Morriss, senior currency strategist at ANZ. "There are still very positive investment flows into the Aussie, while outright yield remains attractive."
The Aussie was quoted at $0.8434/39 against the US dollar, up from $0.8425/30 here late on Monday. It barely reacted to Australian imports data, which showed a 7.2 percent rise in merchandise imports in May, pointing to a possible deterioration in the trade balance.
The Aussie was hovering near a fresh 16-year high against the Japanese yen of 104.34 yen, supported by investors' demand for carry trades. In carry trades, investors borrow in the low yielding Japanese yen to buy the higher yielding Aussie or kiwi.