The Australian and New Zealand dollars were subdued on Thursday as bonds extended their rally to a sixth session as markets wagered interest rates had peaked both at home and in the United States.
The Aussie was flat at $0.6419 AUD=D3 , having run into resistance around $0.6445 the previous session, but was still well above its recent 11-month trough of $0.6286.
The kiwi dollar also steadied at $0.6016 NZD=D3 , after topping out at $0.6056 on Wednesday. It has support around $0.6000 ahead of the recent low of $0.5871.
Bonds were having another upbeat day with 10-year futures YTCc1 rising 8 ticks to 95.64, and yields down at 4.355% AU10YT=RR compared to a peak of 4.682% a week ago.
The only domestic data showed New Zealand food prices fell a surprisingly sharp 0.4% in September led by fruit and vegetables.
The result led Westpac to lower its forecast for third- quarter consumer prices by a tick to 1.9%, short of the 2.1% expectation of the Reserve Bank of New Zealand. The data are due on Oct. 17.
Domestic non-tradable inflation is seen easing a little to a still-high 6.3% for the year, which would keep alive the risk of a further hike from the RBNZ at its Nov. 29 meeting, which will be the last until February.
0#RBNZWATCH Markets imply only a 26% of a rise given the central bank this month indicated a preference for keeping rates at 5.5% for longer, rather than hiking again.
The Reserve Bank of Australia (RBA) is also in wait-and-see mode having held rates at 4.1% for four months straight and markets implying only a one-in-ten chance of a hike at its next meeting on Nov. 7.
0#RBAWATCH Australia's CPI report is due on Oct. 25 and there is some risk it could surprise on the high side and rekindle speculation of another rate rise.
Analysts at NAB warn the trimmed mean measure of core inflation could rise 1.1% in the third quarter and top the RBA's prediction of 0.9%
"We expect market services inflation to remain very strong and is the reason in our view why there is likely to be slower than expected progress in returning inflation to target," argued NAB economist Taylor Nugent.
"NAB's view is that the RBA is likely to lift rates at the November meeting, to get more comfort that inflation is on the required path back to 2-3% in a reasonable time frame."
