WELLINGTON/SYDNEY: The Australian and New Zealand dollars struggled to sustain early gains on Monday as markets were on guard despite upbeat economic data from China that seemed to lessen the risk of a hard landing there.
The Australian dollar seesawed to $1.0402, having initially rallied more than a cent to $1.0470 in early trade as a series of stop losses were tripped.
Also weighing on the Aussie was a surprisingly weak reading on domestic housing and a hourly gap around $1.0360/70 which is doomed to be filled, according to some traders.
"The move was a bit overdone, the Aussie surged quite rapidly. It's still a pretty good day for the Aussie," Greg Gibbs, a strategist at Royal Bank of Scotland.
Indeed, the Aussie was up 0.4 percent from Friday in New York and well off a near three-month low of $1.0305 last week.
Yet, a breach below the 20-day MA at $1.0500 would indicate a negative trend. Bids lay ahead of key support at $1.0360 with resistance at $1.0475/1.0500.
The New Zealand dollar's gains similarly faded in late trade as it slipped back to $0.8193, from a high of $0.8247, though that was still up from $0.8171 in NY on Friday.
The initial relief that followed China's upbeat data on Sunday was gradually fading as some in the market cautioned not to read too much into the better-than-expected figure.
The survey suggested the Chinese economy may still be losing steam because small producers were struggling.
"The data helped the view that China is not falling into a hole but it still doesn't change the market's questioning the outlook of China," said RBS's Gibbs.
The South Pacific currencies are hyper-sensitive to Chinese data because Beijing is a major export market and has a great influence on commodity prices.
The Aussie was hampered in part after Australian government data showed approvals to build new homes slumped 7.8 percent in February to their lowest in almost three years.
That, combined with a private survey indicating consumer inflation slowed to a two-year trough in March, give scope for an interest rate cut in coming months, if not this week.
RBA IN FOCUS
The Reserve Bank of Australia (RBA) holds its April policy meeting on Tuesday and while economists doubt it will cut the 4.25 percent cash rate this time, many do expect an easing to 4.0 percent in May.
Interbank futures imply around a one-in-three chance of an easing this week.
The RBA has sounded content with the economy's trajectory overall, in part because it remains confident Beijing can engineer a soft landing for its economy.
Australian debt futures were off multi-week highs with the three-year contract down 0.05 points to 96.500, while the 10-year contract eased 0.04 points to 95.930.
Against the yen, the Antipodeans held offshore gains following the completion of quarter and year-end redemptions. The Aussie was last at 86.29 yen, having jumped as high as 86.76 and well away from a six-week trough of 84.59 on Thursday.
The kiwi climbed as high as 68.37 yen in early trade, before steadying at 68.12 yen. It has gained nearly two yen since Thursday.
Against the US dollar, the kiwi failed to make a sustained break above resistance at $0.8240, its 55-day moving average. But dealers felt big losses were unlikely as investors were ready to buy on any slide towards $0.8100.
The currency, which was down 2 percent last month but still up 5 percent so far this year, ranged between $0.8060 and $0.8290 in March.
"A breach of one of these levels is required to signal multi-week direction," said Westpac senior strategist Imre Speizer.
"Shorter term, a slight increase in momentum last week and a rounded bottom during March suggests the kiwi should rise to 0.8290 this week."
The Aussie eased back to NZ$1.2676 against the kiwi, after climbing to NZ$1.2699 earlier when it outshone the kiwi on the Chinese data. The Aussie remained in sight of last week's 5-1/2-month low of NZ$1.2600.
New Zealand government bonds finished softer, sending local yields 3 basis points higher along the curve.