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[SYDNEY] The Australian dollar steadied on Monday with investors on the sidelines ahead of inflation data later this week which could cement the case for another rate cut as early as next month.
Underlying inflation is expected to dip to a fresh trough of 1.4 per cent, a Reuters poll showed. The figures are out on July 27.
The market is pricing in around a 64 per cent chance of a rate cut in August, suggesting the biggest move would come if inflation surprised on the high side.
The Australian dollar was a shade higher on Monday at US$0.7471 after slipping 1.44 per cent last week, breaking a robust run of seven straight weeks of gains. That was also its worst weekly showing since the beginning of June.
Across the Tasman Sea, the New Zealand dollar remained on a slippery slope, falling 0.3 per cent to 0.6977. It has dropped on seven out of the last 10 trading sessions and is down 2.2 per cent in July so far.
In contrast, the Aussie dollar is up a quarter of a cent this month.
The losses in the kiwi dollar came on talk of further rate cuts as the country's central bank set its sights on the high dollar and perilously low inflation.
Despite consistent losses in recent weeks, the kiwi dollar is still up more than 8 per cent over the last six months.
"The lull in further declines seems to be the market catching its breath rather than having a change of heart," said OM Financial Private Client Manager Stuart Ive.
Any rallies remain opportunities to sell, he added, tipping near term support at US$0.6975-US$0.6945 and resistance at US$0.7010 - US$0.7065.
New Zealand government bonds eased, sending yields 1 basis point higher across most of the curve.
Australian government bond futures were largely unchanged, with the three-year bond contract off a tick at 98.58. The 10-year contract also lost a tick to 98.0650.