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SYDNEY: The Australian and New Zealand dollars weakened on Monday, with mixed China factory surveys offering little cheer, as traders looked ahead to the rate decisions from their central banks this week.

The Aussie slipped 0.4% to $0.6411, after a brief rally to 65 cents on Friday lost momentum and finished mostly flat at $0.6435.

That was the second time the currency has attempted the 65 cents resistance level in a month.

The kiwi dollar was off 0.1% at $0.5993, having hit a seven-week top of $0.6049 on Friday. However, resistance is stiff at 60 cents while support is at about $0.5940.

Trading was thinned by a market holiday in Hong Kong, while mainland China will be shut until the end of this week.

Parts of Australia are also on a public holiday. Jonathan Petersen, a senior markets economist at Capital Economics, said the rally in the US dollar is at risk of reversal as tailwinds fade, noting that the gap between short-term yields in the US and elsewhere is narrowing.

“For the dollar’s ‘stronger for longer’ run to continue, we think the baton will need to pass from yield gaps to safe-haven demand amid deteriorating risk sentiment.” Declines in Antipodean currencies came despite fresh signs that the economy of key trading partner China may be bottoming out.

Australia, New Zealand dollars maintain gains ahead of US inflation data

Although a private gauge of factory activity in data over the weekend unexpectedly declined, it stayed in expansionary territory - a day after official data registered the first expansion in six months.

The US Congress also agreed a last-minute deal to prevent a partial federal government shutdown, a positive for sentiment.

This week, the focus is on the monetary policy decisions from the Reserve Bank of Australia (RBA) on Tuesday and Reserve Bank of New Zealand (RBNZ) on Wednesday.

The RBA is expected to hold rates steady for a fourth straight month, but a slim majority of economists favour a hike in November.

Market pricing suggests the RBNZ will also stand pat next month, but the risk is tilted towards a hike in November.

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