By Cecile Lefort and Rebecca Howard
SYDNEY/WELLINGTON, Dec 29 (Reuters) - The New Zealand dollar inched up to two-month hights on Tuesday buoyed by a hunt for yield, while its Australian counterpart edged off highs in thin year-end trade.
The New Zealand dollar NZD=D4 crawled up to $0.6866, its highest since mid-October, and looked on track for an increase of nearly three cents this month.
The kiwi gained some ground after the U.S. dollar held near a one-week low against a basket of currencies on some profit-taking in U.S. trade on Monday.
With little or no domestic data on the immediate horizon and many players away for year-end holidays, trading is likely to remain tepid.
The kiwi has shed 12 percent so far this year.
Across the Tasman sea, the Australian dollar AUD=D4 was pinned at $0.7258, having run out of steam when it met heavy resistance at $0.7295 last week.
Dealers said the Aussie's inability to sustain a break higher was a negative. Strong support was found near $0.7210. The Aussie rose 1.4 percent last week but was down 11 percent so far this year.
Undermining the Aussie was another slide in oil prices which dived more than 3 percent on Monday, while global benchmark Brent held near 11-year lows. urn:newsml:reuters.com:*:nL8N14H0QX
Not helping was disappointing industrial profit data over the weekend in China, Australia's top export market. Beijing will release December manufacturing activity numbers on New Year's Day. ECONCN
Against its Canadian counterpart, the Aussie held its own at C$1.0081 AUDCAD=R , not far from a recent 16-month peak of C$1.0108.
New Zealand government bonds 0#NZTSY= eased a tad, sending yields half a basis point higher across the curve.
Australian government bond futures rose to 8-week highs, with the three-year bond contract YTTc1 up 5 ticks at 97.990. The 10-year contract YTCc1 added 6 ticks to 97.2250, while the 20-year contract YXXc1 held steady at 96.7300. (Editing by Kim Coghill)