SYDNEY/WELLINGTON: The Australian and New Zealand dollars were modestly higher on Monday, as they drew support from a more positive environment for risk-taking and waited for key local and offshore data.
The Antipodeans were benefiting from the stronger-than-expected US data, which boosted equities and sparked a lift in treasury yields.
The Aussie pushed up 0.4 percent to $0.8782 as it built on last week's gains and moved further away from a four-year low of $0.8642 at the beginning of the month.
However, while the short term outlook was more settled the negatives for the currency were still lurking and could renew its slide. "While many Aussie carry trades may have already been unwound, short positioning in the futures markets remains well off the extremes of last year," said David de Ferranti, market analyst at FXCM.
"This suggests there is plenty of room in the short trade before it begins to look crowded."
Support for the Aussie was seen at $0.8675 with the top side hurdles starting at $0.8812.
The currency is likely to be tested this week by Chinese third quarter growth data on Tuesday, where the annual GDP rate is seen slowing to 7.2 percent from 7.5 percent.
Australian inflation data is due Wednesday with expectations for a quarterly rise of 0.4 percent in consumer prices, slowing the annual rate to 2.3 percent from 3 percent in the previous quarter.
The New Zealand dollar was also having a positive start to the week, gaining 0.5 percent on the day to $0.7955 as the currency stayed in sight of a three-week high of $0.7997 hit last week.
The kiwi has held much of its gains after recovering from a 14-month low of $0.7708 late last month, but it has been battered by volatility in the US dollar in the past few weeks.
The kiwi was benefiting also from gains on the yen, posting a one-week high around 85.33 yen, as cooling risk aversion prompted a retreat in the safe haven Japanese currency against the higher-yielding.
The kiwi is expected to continue to take its cues from the greenback and general risk sentiment this week, while a weaker-than-expected reading of domestic consumer price data due later this week might knock the currency back towards $0.7700.
"Very low inflation could weigh on the NZD later in the week, but we expect that the USD itself will be the key driver of currency markets this week, including NZD/USD direction," ASB analysts said in a note.
A Reuters poll forecasts the annual inflation rate to slip to 1.3 percent in the third quarter from 1.6 percent, retreating further from the midpoint of the Reserve Bank of New Zealand's 1-3 percent inflation target and easing pressure on the bank to resume its tightening policy.
New Zealand government bonds sold off, with the benchmark 10-year bond rising 7.5 basis points to around 4.05 percent, after last week's 16-month low of 3.95 percent.
Australian government bond futures fell, with the three-year bond contract off 9 ticks to 97.370.
The 10-year contract shed 10 ticks to 96.660.
The premium offered by Australian 10-year yields over 3-year yields shrunk to 62 basis points (bps), its smallest since May last year. It was at 135 basis points early in January.
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