By Cecile Lefort and Charlotte Greenfield
SYDNEY/WELLINGTON, May 10 (Reuters) - The Australian dollar looked vulnerable near multi-month lows against its U.S. counterpart and sterling on Wednesday with investors looking for excuses to cut their long positions.
The New Zealand dollar NZD=D4 traded in a tight range as investors awaited the outcome of a central bank policy review on Thursday, though no change is expected.
The Australian dollar AUD=D4 edged up to $0.7358, from $0.7343 early, but within reach of a four-month trough of $0.7329 touched on Tuesday. ID:nCBR9GED18 ID:nCBR9GED1A
The Aussie is down 1.7 percent so far this month, largely due to retreating iron ore prices, Australia's top export earner.
It was knocked this week following disappointing building approvals and retail sales figure at home.
"The AUD has little to recommend it to investors, a razor thin yield advantage over the USD and a sluggish equity market," said Greg Gibbs, director of independent research house Amplifying Global FX Capital.
"It is possible to see the AUD slump to new cyclical lows."
The Aussie dropped as far as $0.7160 in December.
Another risk on the short-term horizon is a possible ratings cut by S&P Global following the government's annual budget released on Tuesday.
While Fitch and Moody's said the budget had no major impact on Australia's triple A ratings, S&P Global has yet to comment.
It put Australia's top notch ratings on negative watch last July, citing weakened prospects for improvement in budgetary performance.
Meanwhile, the Britain's pound popped above A$1.7600 GBPAUD , the highest since September last year. A break above A$1.7797 would open a test of the symbolic A$2.00 last seen nearly one year ago. Sterling stood at NZ$1.8761, nearing a 9-month peak of NZ$1.8879 touched last week.
The Kiwi edged down slightly from $0.6905 early to $0.6892.
All 26 economists polled by Reuters expect no change to the Reserve Bank of New Zealand's (RBNZ) official cash rate (OCR), which was lowered by 25 basis points to the current record low in November. NZ/POLL
Investors and economists will be on the lookout for any signs it may move earlier to raise rates as inflation picks up. Zealand government bonds 0#NZTSY= eased/gained, sending yields 3 basis points lower at the long end of the curve.
Australian government bond futures bounced from one-month lows, with the three-year bond contract YTTc1 up 1 tick at 98.090. The 10-year contract YTCc1 also added 1 tick to 97.2950, while the 20-year contract YXXc1 was up 3 ticks to 96.7350. (Editing by Simon Cameron-Moore)