The Australian and New Zealand dollars were little changed on Thursday ahead of a key U.S. inflation report where a high reading could offer more impetus for the Federal Reserve to raise rates, which could roil global risk sentiment.
The Aussie was idling at $0.6271 AUD=D3 , after sliding to a fresh 2-1/2 year low of $0.6236 in the previous session although a bout of buying overnight helped it off lows. Resistance is now around $0.6300.
The kiwi dollar lay at $0.5606 NZD=D3 , after climbing 0.5% overnight. It is sitting precariously close to the 2020 trough of $0.5469 and a break would take it to depths not seen since 2009 and the global financial crisis.
"We think there is further downside for the Aussie in the near-term. We think there is some more upside for the U.S. dollar strength really until you get some rate certainty coming out of the Fed," said Jo Masters, chief economist at Barrenjoey in Sydney.
Masters expects another 75 basis point hike from the Fed in November before downshifting to 50 bp in December, which will likely take the top off the U.S. dollar.
"But I still think the Aussie is going to struggle to have a smooth appreciation when geopolitical uncertainties are so high," she said.
U.S. inflation figures out later on Thursday are expected to reinforce bets that the Federal Reserve will continue to tighten policy aggressively. Core inflation is projected to rise 6.5% year-on-year in September, compared with a gain of 6.3% the previous month.
Markets lay 82% odds for another 75 basis-point rate hike in November, versus 18% probability of a half-point bump.
Overnight, data showed U.S. producer prices increased more than expected last month, although underlying goods prices posted their weakest reading in nearly 2-1/2 years.
Elsewhere, economic concerns mount and volatility persists. British government borrowing costs surged on Wednesday after the Bank of England said it would end its emergency bond-buying on Friday.
Yields on Australian 10-year bonds AU10YT=RR eased 5 basis points to 3.996% after rising to the highest in two weeks in the previous session on spreading fears about financial stability.
Three-year yields AU3YT=RR also eased slightly to 3.483%, compared with 3.527%.
