Australia, NZ dollars make little headway as investors brace for CPI, RBNZ

By Stella Qiu

SYDNEY, Nov 25 (Reuters) - The Australian and New Zealand dollars were hemmed in on Tuesday by investor caution ahead of two major domestic events, preventing the risk-sensitive currencies from capitalising on a rally in global stocks.

Australian inflation data and a Reserve Bank of New Zealand policy decision are both due on Wednesday, just half an hour apart.

The Aussie AUD= was flat at $0.6465, battling to stay above the 200-day moving average at $0.6461.

Australian monthly inflation data are likely to show price pressures remained elevated in October, after a surprisingly strong quarterly inflation reading last month spurred the Reserve Bank of Australia to hold rates steady at its most recent meeting and shift to a more hawkish tone.

Meanwhile, policymakers at the U.S. Federal Reserve have adopted an increasingly dovish posture, buoying equity markets worldwide, but having little impact on the U.S. dollar so far.

The Aussie-greenback pair has moved little even in the face of the widest interest rate differentials since mid-2022. Australian two-year government bond yields US2YT=RR currently sit at 3.687%, some 20 basis points above their U.S. counterparts.

However, IG analyst Tony Sycamore says he expects those pressures to ultimately support the Australian currency.

"I feel like the Aussie should start to get its act together and at the very, very least lift back to that $0.6520 area," he said.

The kiwi dollar NZD= edged up 0.1% to $0.5619 on Tuesday, as it continues to find its feet following a drop to a seven-month trough of $0.5578 last week.

The RBNZ is widely expected to cut rates by 25 basis points to 2.25% on Wednesday, with traders seeing a small risk of a half-point reduction.

"With a large amount of stimulus already working its way through the economy, and the NZ dollar losing ground in recent weeks, we expect the economy will strengthen over the year ahead," said Satish Ranchhod, a senior economist at Westpac, who sees the central bank cutting rates by a quarter point.

"Against that backdrop, we expect that the RBNZ will be cautious about pumping the gas too hard at this late stage of the cycle."

However, 5% of respondents in a Westpac client survey predict the central bank will hold rates steady.

A hawkish surprise could send the kiwi flying, and threaten the Aussie dollar's 4% gain against its New Zealand peer AUDNZD= this year.