By Cecile Lefort
SYDNEY, Nov 30 (Reuters) - The New Zealand dollar hit a three-week high on Wednesday after the central bank stepped up warnings on house prices, reinforcing market expectations it was done cutting interest rates.
In contrast, the Australian dollar lost momentum following a sharp correction in iron ore prices and a shockingly weak building approvals report.
The New Zealand dollar NZD=D4 rose to $0.7149, having climbed to a three-week peak of $0.7159. Resistance was found at $0.7228 with support around $0.7130.
Much of the strength came after the Reserve Bank of New Zealand (RBNZ) flagged possible restrictions on mortgage lending to curb a soaring property market, suggesting it was done cutting rates. RBNZ still sees risks to the financial system via housing," said Nick Tuffley, chief economist at ASB Bank. "We continue to expect the RBNZ to keep the official cash rate on hold at 1.75 percent for the foreseeable future."
Earlier this month, the central bank cut rates to a record low of 1.75 percent.
The kiwi powered up to its highest in 11 months against the yen at 80.52 NZDJPY=R , putting it in on track for a 7.5 percent monthly gain, the largest since 2012.
It also stood tall against the euro which dropped to NZ$1.4888 EURNZD=R , showing a loss of 3 percent in November.
Across the Tasman Sea, the Australian dollar AUD=D4 eased to $0.7471, from $0.7489 early, having met heavy resistance ahead of 75 cents. Support was found at $0.7456, then $0.7445.
The Aussie started its descent after domestic building approvals dropped 12.6 percent in October, a blow to what has been one of the strongest sectors of the economy. took another knock after iron ore futures traded in China skidded 7 percent, a second day of sharp losses. Iron ore is Australia's top export earner.
For the month, the Aussie is down 1.8 percent, largely due to U.S. dollar strength following the election of Donald Trump to president.
The Aussie also underperformed its kiwi cousin to trade at NZ$1.0431 AUDNZD=R , moving closer to the November low of NZ$1.0354. It has lost 1.7 percent this month.
Australian government bond futures were mixed, with the three-year bond contract YTTc1 off 1 tick at 98.080. The 10-year contract YTCc1 shed 2.5 ticks to 97.3050, while the 20-year contract YXXc1 gained 1 tick to 96.7150.
New Zealand government bonds 0#NZTSY= eased, sending yields two basis points higher at the long end.