The Aussie eases to $1.0338 after China released official PMI numbers. The reading matched expectations at 49.8, signalling the Chinese economy, a key customer for the Australia and New Zealand, may be stabilising as recent pro-growth measures gained traction.
But the results fail to quell global growth worries with Europe slipping towards recession and the US recovery losing steam.
Aussie dips 0.4 pct on the day, more than a cent lower than Friday's peak of $1.0474. Support seen at $1.0328, a trough hit last week, ahead of $1.0290, with resistance at $1.0410.
The New Zealand dollar 0.3 pct lower on the day to $0.8276, having briefly touched a six month high of $0.8357 on Friday.
Near term kiwi support at $0.8254 and below that $0.8230, with the topside likely capped at $0.8330.
Key event this week is the Reserve Bank of Australia's rate decision on Tuesday. Interbank futures put a two-thirds chance of a 25 bps cut in the cash rate to 3.25 percent.
A private gauge of Australian inflation edged up modestly in September while measures of core inflation stayed benign, suggesting price pressures alone would not prevent a cut in interest rates.
But economists are not so convinced with 13 of 19 economists surveyed by Reuters forecasting the RBA to keep rates on hold. They believe the bank will wait for confirmation of tame inflation later in the month before pulling the trigger on a cut. A decision to hold rates could underpin the Aussie.
Markets positioning ahead of the RBA rate decision sends Aussie falling towards one-year lows against the kiwi. Last at NZ$1.2483, having touched NZ$1.2469 on Friday on RBA rate cut risks vs a steady rate outlook in New Zealand.
A Westpac survey shows sentiment among NZ workers perks up from a three-year low in Q3, but it is still pessimistic even as the economy is expected to pick up more due to quake rebuild in Christchurch.
Australian government bonds eased a touch following recent hefty gains, with the three-year contract 0.01 points lower at 97.640. The 10-year contract dips 0.035 points to 97.080, from two-month highs touched last week.
NZ government bonds flat.
Trading activity thin with much of Asian and Australian markets shut for public holidays, while China is shut all week.