SINGAPORE: The Australian and New Zealand dollars hovered below recent peaks on Monday as traders wait to see whether upcoming Australian inflation data will match a red-hot reading in New Zealand that lifted yields and the currencies last week.
The Australian dollar crept up 0.2% to $0.7484, after rising as far as $0.7546 last week to test resistance around to its 200-day moving average of $0.7562.
The New Zealand dollar was steady at $0.7154, below last week's four-month high of $0.7219.
New Zealand dollar higher as inflation surprises, yields jump
Bond markets steadied after selling through last week, with strong demand at Monday's A$1 billion ($746 million) Australian government bond auction which was more than six times oversubscribed.
Nevertheless, Australian interest rate markets remain positioned for a far more aggressive hiking path than the central bank expects and traders are closely watching inflation due out on Wednesday.
Economists polled by Reuters expect the Reserve Bank of Australia's preferred "trimmed mean" CPI to show a 1.8% year-on-year for the third quarter.
The RBA has forecast that it would hold steady at about 1.75% through to December.
"If we get an overshoot, I think that could be quite significant and justify the rates pricing," said Chris Weston, head of research at brokerage Pepperstone in Melbourne.
"That would also lead us in to the next RBA meeting where the RBA may have to acknowledge the upside surprise."
Markets have priced hikes beginning in just under a year's time and some 100 basis points of tightening by the end of 2023, while the RBA does not expect to raise rates before 2024 and has played down the importance of quarterly inflation readings.
New Zealand government bonds were broadly steady on Monday, as were Australian government bond futures, with the three-year bond contract flat at 99.065. The 10-year contract rose three ticks to 98.205.
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