By Wayne Cole
SYDNEY, June 18 (Reuters) - The Australian dollar slipped to fresh five-month lows on Tuesday after the country's central bank reiterated that a further easing in interest rates would likely be needed to revive wage growth and inflation.
The Aussie AUD=D3 dipped as deep as $0.6840, the lowest since the flash crash of early January. The last time it was at these levels for any period of time was in January 2016 when it bottomed out in the $0.6827/30 area.
The New Zealand dollar NZD=D3 was stuck at $0.6495, and dangerously close to the May trough of $0.6482. A break there would take it back to territory last trod in October 2018.
The latest losses came after minutes of the Reserve Bank of Australia's (RBA) June Board meeting showed that, even after cutting rates a quarter point to a record low of 1.25%, further easing was necessary to push unemployment down.
"This is about as dovish as it gets," said Gareth Aird, a senior economist at CBA. "We now expect two further 25 basis-point rate cuts in 2019 and favour the August and November Board meetings."
That shift means all four of the major local banks are now tipping 0.75%.
Financial markets 0#YIB: imply around a 50-50 chance of a cut to 1% at the RBA's July meeting and are almost fully priced for a move in August. A further easing to 0.75% is considered a done deal by early next year.
Investors are also wagering the Reserve Bank of New Zealand will ease at least once more having cut rates in May. The central bank has played down the prospect of a cut and a move at its next meeting on June 26 is considered unlikely RBNZWATCH .
Yet it might ultimately have no choice given the downward direction of rates globally.
The U.S. Federal Reserve concludes a policy meeting on Wednesday amid intense speculation it will open the door to an easing as early as July.
Futures 0#FF: are almost fully priced for a reduction to 2.0-2.25% in July and imply nearly 100 basis points of easing by mid-2020 FEDWATCH .
Indeed, there was a chance the Fed could sound dovish enough this week to give the Aussie and kiwi a lift, albeit likely a temporary one.
Australian bond yields fell anew in the wake of the RBA minutes, with the three-year rate AU3YT=RR at 1.00% and just above all-time lows.
Three-year bond futures YTTc1 firmed 1 tick to 99.030, implying a yield of 0.97%, while the 10-year contract YTCc1 rose 2 ticks to 98.6250.
Yields on New Zealand two-year debt NZ2YT=RR were also near historic lows at 1.205% and far beneath the 1.5% cash rate. (Editing by Jacqueline Wong)