The Australian and New Zealand dollars were off lows against their US counterpart and yen on Tuesday, but investors remained wary of China's recent erratic yuan guidance and its ultimate policy intentions. The Australian dollar was squeezed higher to $0.6990 in an extremely oversold market, having hit a four-month trough of $0.6927 on Monday. It is still down 4 percent so far this year and a break under $0.6892 would take it to ground last trod in 2009.

Versus the safe-haven yen, the Aussie stood at 82.24 yen and up from a three-year trough of 80.84. The kiwi held at 77.24 yen, off from a four-month low on Monday. The New Zealand dollar edged up slightly to $0.6560 after falling as far as $0.6509 in early morning trading. New Zealand government bonds eased, sending yields 3 basis points higher along the curve. Australian government bond futures dipped, with the three-year bond contract off 3 ticks at 98.000. The 10-year contract was down 3.5 ticks at 97.2150, while the 20-year contract also fell 3.5 ticks to 96.7300.

Copyright Reuters, 2016