By Ian Chua and Gyles Beckford
SYDNEY/WELLINGTON, July 2 (Reuters) - The Australian dollar came under renewed pressure on Tuesday after the Reserve Bank of Australia (RBA) kept the door open to further interest rate cuts and tried to talk down the currency.
As expected, the central bank left the cash rate steady at a record low 2.75 percent for a second month, and reiterated that the tame inflation outlook 'may provide some scope for further easing'.
In a short post-meeting statement, the RBA also said: 'It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy.'
The Aussie dollar promptly obliged, falling to $0.9166 from an early high of $0.9250. It erased half of Monday's 1.1 percent gain, bringing into view a 33-month trough of $0.9110 set first thing this week.
It also lost ground against the euro and yen. In trade weighted terms, the Aussie has fallen nearly 12 percent from a high back in April, giving a much-needed lift to sectors such as manufacturing and tourism.
'The guidance hasn't really changed, they're still saying that the inflation outlook may provide scope for more cuts if the demand side weakens sufficiently,' said Ben Jarman, economist at JPMorgan.
'Our forecast is for another 50 basis points (of cuts) to go, 25 of that in November and 25 early next year.'
Interbank futures are fully priced for a quarter point cut by October.
'If the AUD falls further it may obviate the need for more rate cuts,' said Paul Bloxham, HSBC's chief economist for Australia and New Zealand.
'If it stays around its current level, or lifts, we see the RBA as likely to cut rates further, perhaps as soon as next month, after Q2 CPI.'
Australian bond futures extended gains with the 3-year contract 5 ticks higher at 97.210, while the 10-year contract put on 9.5 ticks to 96.260.
Easing in tandem with the Aussie, the New Zealand dollar slipped to $0.7784, retreating from an earlier high of $0.7830.
Near term support for the kiwi is seen at $0.7765, with the topside hurdles at $0.7861, ahead of $0.7900.
New Zealand government bonds had a modest bid tone, pushing yields a couple of ticks lower along the curve.
(Australia and New Zealand bureaux; Editing by Sanjeev Miglani) Keywords: MARKETS AUSTRALIA NEWZEALAND/FOREX
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