By Cecile Lefort and Rebecca Howard
SYDNEY/WELLINGTON, Jan 19 (Reuters) - The Australian and New Zealand dollars reversed early gains to be lower on Tuesday as disappointing data on Chinese retail sales and industrial output underlined concerns about global growth.
The Australian dollar AUD=D4 fell to $0.6842, from a session peak of $0.6893, pulling close to a seven-year trough of $0.6827 set on Friday. A break under this could see a retracement all the way to 63 cents, the next historic support.
China's economy grew 6.8 percent in the fourth quarter from a year earlier, the slowest since 2009. We had some disappointing Chinese economic data and it is weighing on the Aussie," said Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia.
He said the IMF's global growth outlook due out later in the session could provide short-term support to the Aussie if it offers a more optimistic view on the world's economy. But Haddad forecasts the Aussie to slide to 65 cents by the end of March.
The Aussie has skidded more than 6 percent this year largely on concerns that the Chinese economy's troubles might be beyond Beijing's ability to fix.
Confusion over China's currency policy and its commitment to reforms also added to worries. The Aussie is often used as a proxy for China-related trades.
The New Zealand dollar NZD=D4 slipped to $0.6425, from $0.6443, pulling close to a recent three-month low of $0.6382.
It reversed gains made after a quarterly report from the New Zealand Institute of Economic Research showed business confidence rebounded in the fourth quarter.
NZIER senior economist Christina Leung said the bounce suggests the central bank will keep interest rates on hold this year. ahead, markets await inflation data on Wednesday for clues on whether further rate cuts are still on the cards.
Analysts expect consumer price inflation to have fallen 0.2 percent in the fourth quarter, from the previous quarter, while the annual rate held at 0.4 percent, according to a Reuters poll. Zealand government bonds eased slightly.
Australian government bond futures edged up, with the three-year bond contract YTTc1 up 2 ticks at 98.130. The 10-year contract YTCc1 also gained 2 ticks to 97.3300, while the 20-year contract YXXc1 eased half a tick to 96.8050. (Editing by Sam Holmes)