WELLINGTON/SYDNEY: The Australian and New Zealand dollars were stuck in a holding pattern on Monday with a holiday in Japan and the risk of a fresh flare up in geopolitical tensions keeping investors firmly on the sidelines.
The Aussie was a shade softer at $0.9391, having on Friday pushed up from $0.9336.
It remained well within a $0.9320/9505 range seen in the past month.
Its New Zealand counterpart marked time at $0.8702, steadying after last week's 1.5 percent tumble, the biggest weekly decline in about six months.
The market had sold the currency in response to soft domestic inflation data and a further fall in dairy prices, but kiwi bears were turning wary ahead of an expected interest rate hike later in the week.
The Reserve Bank of New Zealand (RBNZ) is seen lifting the cash rate for a fourth consecutive review on Thursday, by 25 basis points to 3.5 percent.
The market is divided on whether it might signal a pause given the high currency, restrained inflation and falling dairy prices. Any sign of an extended hiatus could prompt kiwi bears to renew their attack, traders said.
Market pricing puts an 87 percent chance of a rate rise this week, but has scaled back the amount of rate rises over the next 12 months to 67 basis points, from 84 basis points early last week.
However, the RBNZ could chose to focus on strength of the domestic economy to argue for more action. Data on Monday showed migration gains last month were the second highest on record, while the annual gains were the highest in nearly 11 years.
The RBNZ has said the level of immigration is an important factor in its interest rate policy.
"The RBNZ's hawkish bias will remain, with demand upside from the population explosion, and inflationary pressures unlikely to subside in construction," said TD Securities strategist Prashant Newnaha. Initial support for the kiwi was seen at $0.8665 and more substantially around the 50-day moving average of $0.8650.
The topside is seen guarded initially at $0.8719.
For Australia, the main event this week is inflation data due on Wednesday, with an upside surprise likely to have the greater impact given futures markets have priced in a 50-50 chance of a rate cut by year end.
The Reserve Bank of Australia (RBA) is not worried about inflation at the moment and has repeatedly said it expected underlying measures of price pressure to remain benign.
For now, though, the downing of a Malaysian airliner in eastern Ukraine and fighting in Gaza continued to dominate the headlines.
"While the risk tone remains uncertain with both the Ukraine and Middle East weighing on the market sentiment, we should expect the Aussie to remain in current ranges," said Stephen Innes, senior trader at OANDA Asia Pacific in Singapore.
New Zealand government bonds were softer, pushing yields as much as 3 basis points higher.
Australian bond futures also eased after last week's rally to multi-month highs.
The 3-year contract slipped 4 ticks to 97.440, down from an 11-month high of 97.540.
The 10-year contract eased 1.5 ticks to 96.615, off a 13-month peak of 96.695.
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