By Swati Pandey
SYDNEY/WELLINGTON, Jan 4 (Reuters) - The Australian dollar edged up on Wednesday, aided by tighter capital controls from China, while the New Zealand dollar extended its losing streak for a fourth straight session on weaker dairy prices.
The Australian dollar AUD=D4 added 0.12 percent to $0.7227, edging away from a seven-month trough of $0.7163 hit last week.
Traders said there was some relief that a feared rush of capital out of China had yet to eventuate, with Beijing slapping tighter controls on foreign currency purchases over the weekend.
The Aussie is often used as a liquid proxy for the yuan and had been under pressure recently on worries the yuan would come under pressure when China's individual annual quota for foreign currency purchases was reset this week. Aussie lost 2.8 percent in January last year when the yuan tumbled amid heavy capital outflows.
"Of course these are early days, but to the extent that the news eases concerns of a possible repeat of last January's China's equity and CNY meltdown, that is good news for China and the AUD," said Rodrigo Catril, currency strategist at National Australia Bank.
It also did well against other currencies, rising 0.2 percent versus its New Zealand counterpart AUDNZD= and 0.3 percent on the yen AUDJPY= . Both the euro EURAUD= and the pound GBPAUD= slipped on the Aussie.
The New Zealand dollar NZD=D4 was down 0.28 percent at $0.6895, but has solid chart support in the $0.6863/6890 zone.
International milk prices posted their largest fall in three months in the first dairy auction of the year. It was the first time in more than six months that prices fell at consecutive fortnightly auctions. cautioned against reading too much into the data as the auction saw softer volumes and smaller bidders. The Global Dairy Price index is still up about 44 percent year-on-year.
Australian government bond futures eased in line with U.S. Treasuries, with the three-year bond contract YTTc1 down 4 ticks at 97.930. The 10-year contract YTCc1 was off 5.5 ticks at 97.1600.
New Zealand government bonds 0#NZTSY= bucked the global trend and rose in price, sending yields about 4 basis points lower at the long end of the curve.