The Australian and New Zealand dollars bounced from lows on Tuesday while the Australian cash and swap yield curves flattened to multi-month lows as investors bet the next move in domestic rates is still up. The Australian dollar was firm at $0.9018, well above Monday's low of $0.8858. The New Zealand dollar was also firm at $0.7101, up from Monday's trough of $0.6995.
Upbeat remarks from the Reserve Bank of Australia (RBA) that domestic economic growth could accelerate right out to 2012 without an attendant spike in inflation supported demand for the Aussie dollar. The spread between 10- and three-year government bond yields fell to 45 basis points, the flattest curve in three months. The kiwi had a late session surge to its intra-day high around $0.7100, having spent much of the day contained between $0.7040 and $0.7080. It tested but found demand overnight at its support level of $0.7000.