By Swati Pandey and Charlotte Greenfield
SYDNEY/WELLINGTON, Aug 2 (Reuters) - The Australian dollar proved remarkably resilient on Tuesday as investors brushed aside a cut in rates to record lows and instead focused on the still fat yields offered by government bonds.
The Aussie AUD=D4 initially fell half a U.S. cent to $0.7486 when the Reserve Bank of Australia (RBA) cut its cash rate a quarter point to 1.5 percent. Yet within a couple of hours it was back up at A$0.7547, undimmed on the day.
The policy easing was the second this year as the central bank tries to boost inflation and restrain a rising currency. The Aussie has gained 3.6 percent so far this year. futures 0#YIB: rallied as the market flirted with the idea of more cuts, implying a near-70 percent chance of another move by December.
Yet even with the latest cut, Australian rates look attractive compared to rich world peers. Ten-year domestic debt yields 1.83 percent AU10YT=RR compared to 1.53 percent in the United States and -6 basis points in both Germany and Japan.
"We see the A$ as well supported on dips, with iron ore prices strong, global risk sentiment improving post Brexit, demand for yield around the world solid and the US$ trading within recent ranges," said Robert Rennie, global head of market strategy at Westpac.
Attention will now shift to retail sales numbers due on Thursday and the RBA's latest monetary policy statement on Friday for guidance on the possibility of further easing.
Data on Tuesday showed Australia's economy may have slowed last quarter as net exports came off the boil after a very strong start to the year. the Tasman Sea, the New Zealand dollar NZD=D4 rose 0.5 percent on Tuesday to $0.7206, tagging behind the Aussie.
Data from national valuer QV showed house prices continued to soar, rising 14.1 percent in the year to July, though this did little to dampen market expectations for a cut in interest rates next week. were now awaiting the results of a global dairy auction to be held in the early hours of Wednesday morning with futures suggesting whole milk prices would rise.
New Zealand government bonds 0#NZTSY= eased, sending yields 4 basis points higher at the short end of the curve and 1.5 basis points higher at the long end of the curve.
Australian government bond futures rallied, with the three-year bond contract YTTc1 up 4 ticks at 98.67. The 10-year contract YTCc1 climbed 15 ticks to 98.1650.