SYDNEY, June 14 (Reuters) - The Australian and New Zealand dollars were hovering close to their multi-week highs on Wednesday, after slowing U.S. inflation made it all but certain that the Federal Reserve would skip a hike later in the day, sparking a risk-on rally.
The Aussie was fetching $0.6776 AUD=D3 , after hitting a one-month high of $0.6807 overnight as the U.S. dollar wobbled on the inflation report. That level remained the near-term resistance, while major support lies at the 200-day moving average of $0.6691.
The kiwi dollar climbed 0.2% to $0.6164 NZD=D3 , after advancing 0.4% overnight to a fresh three-week top of $0.6178. It now has support at the 200-day moving average of $0.6150.
The two were also aided by stronger commodity prices, with sentiment improving a little on rising expectations of more policy support from the Chinese government, on top of the policy rate cut on Tuesday, to steady a faltering economy.
The much-watched U.S. CPI report overnight showed prices barely rose in May, with just a 0.1% increase from the prior month, a pleasant downside surprise that triggered a rally in U.S. stocks to the highest in 14 months.
Traders have firmed up expectations of a rate pause by the Fed to 95% when it concludes a two-day policy meeting on Wednesday, but they are also bracing for the possibility of a hawkish pause, with a 60% probability priced in for a hike in July, according to CME FedWatch Tool.
"If we are right about the FOMC sounding modestly dovish tomorrow, AUD/USD may have some further upside," said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
Markets would also be focusing on the post-policy press conference from Fed Chair Jerome Powell and whether the dot plot would signal any hikes ahead.
Reflecting views rates would stay higher for longer, global yields climbed overnight and Australia's government bond yields moved higher on Wednesday.
Three-year yields AU3YT=RR jumped 7 basis points to 3.914%, the highest since October, and the benchmark ten-year yields AU10YT=RR rose 6 bps to 3.974%.
