By Wayne Cole and Charlotte Greenfield
SYDNEY/WELLINGTON, March 7 (Reuters) - The Australian dollar inched higher on Tuesday after the country's central bank kept interest rates unchanged and showed no hint of considering another easing, underlining the outlook for steady policy.
The Aussie AUD=D4 was 0.3 percent firmer on the day at $0.7602, with dealers reporting a rush of algorithmic buying just before the policy decision.
The Reserve Bank of Australia's (RBA) March policy meeting ended with rates unchanged at 1.5 percent as widely expected and the accompanying statement was generally upbeat. AU/INT
Last month, RBA Governor Philip Lowe said the market was "reasonable" to price in unchanged rates for all of 2017, arguing further cuts would only stoke a debt-fuelled bubble in house prices. central bank has not shown any inclination as yet to tighten given underlying inflation and wages growth are running at record lows and there is plenty of slack in the labour market.
The net result is that interbank futures 0#YIB: show almost no chance of an easing out to September and then imply a growing chance of a hike into 2018.
"Household wages and income remain very weak, and import prices are falling, pointing to risk that inflation shifts even lower," said CBA's senior interest rate strategist Jarrod Kerr.
"That could open the door for rate cuts if commodity prices pull-back as forecast, so this remains the greater risk for 2017," he added. "If that doesn't eventuate, rate hikes will likely be on the agenda for later in 2018."
The New Zealand dollar NZD=D4 hit a near two-month low under major chart support at $0.7000 on Tuesday, before steadying somewhat at $0.7002.
The Kiwi had shed 0.75 percent overnight, outstripping the U.S. dollar's modest 0.1 percent gain against a basket of world currencies .DXY .
Traders said speculators were shorting the Kiwi ahead of a global dairy auction due late Tuesday, that was expected to show a sharp drop in prices of around 8 percent, as favourable farming conditions in New Zealand boosted supply.
Dairy is the country's biggest single-goods export.
New Zealand government bonds 0#NZTSY= eased, sending yields 1.5 basis points higher at the long end of the curve.
Australian government bond futures dipped, with the three-year bond contract YTTc1 off 3 ticks at 97.920. The 10-year contract YTCc1 lost 1.5 ticks to 97.1500. (Editing by Sherry Jacob-Phillips)