The Australian dollar nudged higher on Tuesday after a business conditions indicator jumped to near decade highs but the currency struggled at 77 US cents, which is proving to be a crucial barrier. The Australian dollar added 0.35 percent to $0.7665, coming off a three-month high of $0.7696 hit in early February.
The Aussie has traded in a sideways direction since the beginning of the month, failing persistently at $0.7700, despite a recent surge in the price of iron ore - Australia's top export earner. Earlier in the session a survey of business conditions jumped to the highest in about a decade as firms reported a pick up in sales and employment, the latest in a string of reports pointing to gathering momentum heading into 2017.
"The Reserve Bank of Australia watches this survey and will be encouraged by the broad-based improvement," said Annette Beacher, chief Asia-Pac Macro Strategist at TD Securities. Across the Tasman Sea, the New Zealand dollar held at $0.7179, after hitting a fresh 3-1/2 week low of $0.7156 on Monday.
The Kiwi was knocked off a three month peak last week after the Reserve Bank of New Zealand signaled it would keep rates at record low for two years, hosing down bets of a rate hike later in 2017. Analysts still expect the Kiwi to pick up on strong domestic growth, thanks to robust migration and a revival in the price of milk, New Zealand's biggest goods export earner. New Zealand government bonds eased, sending yields 2.5 basis points higher. Australian government bond futures fell, with the three-year bond contract down 7 ticks at 97.98. The 10-year contract 5 ticks to 97.2150.