SYDNEY, June 11 (Reuters) - The Australian and New Zealand dollars were on the back foot on Tuesday as traders looked ahead to a Federal Reserve policy meeting and U.S. inflation data, while bonds further lengthened the odds of early rate cuts at home.
The Aussie slipped 0.3% to $0.6592 AUD=D3 , having rallied 0.4% overnight to as far as $0.6611, recouping some of the losses from a 1.3% tumble on Friday. A weak Chinese yuan to a seven-month low also weighed on the Aussie.
Support is now at Friday's low of $0.6580. The kiwi dollar fell 0.1% to $0.6122 NZD=D3 , after rising 0.4% overnight to as high as $0.6128, helping it to trim some of the Friday's 1.6% loss. Support is at around $0.6080.
The U.S. currency has been supported by higher Treasury yields in the aftermath of surprisingly robust jobs data at the end of last week, which sparked a dramatic paring of bets for Fed rate cuts this year. All eyes are now on the Federal Reserve meeting and U.S. inflation report on Wednesday.
The broader shift has been echoed in Australia where investors pushed back the first rate cut from the Reserve Bank of Australia to July 2025, with a rate cut this year just at a 32% probability.
0#RBAWATCH ANZ on Tuesday pushed out the expected timing for the first rate cut to February 2025 from November this year, due to data showing less weakness in household consumption and government spending supporting growth.
"Accordingly, we now expect the first cash rate cut in February 2025. We expect a follow-up easing shortly thereafter. We are retaining three cuts in our forecasts but see the final cut being delayed until the final quarter of 2025," said Adam Boyton, head of Australian economics at ANZ.
Indeed, a private survey showed that Australian business conditions eased further in May, but alarmingly, cost pressures showed signs of re-accelerating, underlining the inflation challenge.
Local bond yields spiked on Tuesday as Australian investors returned from a public holiday to play catch-up in the global market. Three-year bond yield AU3YT=RR rose 6 basis points to 3.977%, while 10-year bond yield AU10YT=RR jumped 10 bps to 4.343% from Friday's close.
