Australia, NZ dollars cling to gains as investors bet on US rate cuts

• AUD holds Friday's 1.1% gain, NZD back from 4-month low
• RBA minutes on Tues, monthly CPI data on Weds
• NZ Q2 retail sales rise; investors expect 2 more rate cuts by early 2026

SYDNEY, Aug 25 (Reuters) - The Australian and New Zealand dollars largely held their gains on Monday, after a dovish turn from the world's most powerful central banker hurt the greenback and helped the pair recover in the previous session, although they are still grappling with rate-cut burdens.

The Aussie AUD=D3 slipped 0.1% to $0.6485, having rallied 1.1% on Friday to bounce off a two-month trough of $0.6415. That helped it trim the losses last week to just 0.3% but resistance is heavy at the 65 cent level.

The kiwi dollar NZD=D3 eased 0.2% to $0.5856, after gaining 0.9% on Friday to rebound from an over-fourth-month low of 58 cents. It, however, still ended the week with a sizeable 1% decline, undermined by expectations of more stimulus after a dovish rate cut from its central bank last week.

Data on Monday showed retail sales in New Zealand rose a solid 0.5% in the June quarter amid signs of a long-awaited recovery in consumer spending. Investors are still expecting two more easings of the current cash rate of 3% to 2.5% by early next year.

"Today's update is an encouraging sign for spending over the remainder of 2025. Spending levels are already pushing higher, and the full impact of the large reductions in interest rates over the past year is yet to be felt," said Satish Ranchhod, a senior economist at Westpac.

The Reserve Bank of New Zealand on Monday proposed an easing of lenders' capital requirements, after criticism that the regulations reduced availability of funds in the economy and led to extra costs for borrowers.

In the broad foreign exchange market, the dollar is struggling to rebound after Federal Reserve Chair Jerome Powell's dovish change of tone on Friday had futures pricing in an 84% chance of a rate cut in September, and at least 100 basis points of easing by the middle of next year. 0#USDIRPR

"AUD/USD will be supported by a reassessment of U.S. interest rate cuts early this week," said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia.

"But we expect AUD/USD to continue later along its gentle decreasing path," said Capurso, citing weaker iron ore prices and the risk of a soft monthly Australian CPI report due on Wednesday. Analysts expect the monthly inflation to pick up a little to 2.3% in July from 1.9% the previous month due to the unwinding of electricity rebates.

The Reserve Bank of Australia will publish the minutes of its last policy meeting on Tuesday where all the policymakers voted to cut interest rates by a quarter-point to 3.6%.