SYDNEY/WELLINGTON: The Australian and New Zealand dollars kept gains versus their US counterpart on Tuesday as the search for yield largely supported demand for carry trades.

While liquidity was thinned by a holiday in Singapore, the Australian dollar edged down to $0.7640 but was still near a three-week peak of $0.7672 set on Monday.

A break above $0.7676 would push it to its highest level since early May.

It has bounced a cent and a half since it hit a low in the wake of last week’s interest rate cut by the Reserve Bank of Australia.

Much of the Aussie resilience comes from a lack of US dollar momentum combined with strong appetite for risk assets.

Sterling dropped to a three-year low of A$1.6976 to be down 16 percent so far this year. The euro stood at A$1.4519, having touched its lowest since April on Monday. A break of A$1.4368, would be the weakest in more than a year.

The New Zealand dollar inched lower to $0.7133, but was up from the previous day’s low of $0.7088.

New Zealand government bonds eased, sending yields 1.5 basis points higher at the long end of the curve.

Australian government bond futures had a soft tone, with the three-year bond contract off 1 tick at 98.570. The 10-year contract fell 2 ticks to 98.0100, while the 20-year contract was steady at 97.4700.

“We’ve got money pouring into emerging markets and the Aussie dollar is correlated to them,” said Ray Attrill, global co-head of FX strategy at National Australia Bank, seeing the Aussie dropping to around 72 cents by September.—Reuters