(Adds reaction after RBA decision)
By Cecile Lefort and Rebecca Howard
SYDNEY/WELLINGTON, Feb 2 (Reuters) - The Australian dollar inched lower on Tuesday after the Reserve Bank of Australia (RBA) kept rates unchanged at it first policy meeting of the year but left the door open to further easing.
The Australian dollar AUD=D4 pared early gains to be down slightly at $0.7080, from 71 cents in early trade. It initially rallied to $0.7130 after the RBA did not sound as dovish as some bears had been wagering on.
Yet, it quickly ran out of puff as investors were keen to lock in profits. While the RBA acknowledged the risks from turmoil in global financial markets, it also saw reasonable prospects for continued growth at home. L3N15G62S
"They did acknowledge financial market concerns but I don't think there is any near-term implications for monetary policy," said Tom Kennedy, an economist at JPMorgan (N:JPM), seeing a steady rate outlook this year.
"The risk is they have to ease, but it is very much data driven."
Interbank futures 0#YIB: imply around a 50-50 chance of a move by May and are fully priced for a cut to 1.75 percent by October.
Resistance was found in the $0.7150-70 region, which coincides with 55- and 100-day moving averages and major retracement levels. The Aussie rose as far as $0.7142 last week, its highest since early January, though it was still down 2.6 percent this year on global growth concerns.
The New Zealand dollar NZD=D4 edged up to $0.6520, from $0.6500 in early trade, pulling away from a four-month trough touched in January. It was still 4.4 percent weaker so far this year.
The NZD has performed "relatively well" in the current risk-off environment, said BNZ FX Strategist Jason Wong.
"This seems to reflect portfolio flows, rather than fundamentals," he noted. The Kiwi was the weakest major currency in January, falling by 5.1 percent, so any outperformance should be seen in that context.
"We expect some consolidation around current levels. Our fair value estimate has risen a cent to $0.63," he said.
New Zealand government bonds 0#NZTSY= gained, sending yields between 0.5 and 3 basis points lower.
Australian government bond futures were a touch lower, with the three-year bond contract YTTc1 off 1 tick at 98.130. The 10-year contract YTCc1 lost half a tick to 97.3750, while the 20-year contract YXXc1 shed 1 tick at 96.8600. (Editing by Jacqueline Wong)