SYDNEY: The Australian and New Zealand dollars struggled to extend a rally on Monday, after outperforming their peers in the previous session, with traders wary ahead of key US inflation data.

The Aussie was off 0.2% at $0.6832, after surging 1.4% to as high as $0.6877 in the previous session as speculators took profit on short positions.

Near-term support is at its July trough of $0.66825.

The kiwi dollar was mostly unchanged at $0.6108, having also climbed 0.9% on Friday. It has support at its recent 27-month low of $0.5997.

Tuesday’s reading on US consumer prices is likely to show a peak for inflation. Economists polled by Reuters expect the annual CPI to have eased to 8.1% in August, compared with 8.5% in July.

Australia, NZ dollars up off the floor, bonds get RBA boost

A softer US inflation reading would likely weigh on the greenback, underpinning risk-sensitive assets such as the Australian dollar.

“There is a clear focus on US CPI – that is the marquee event risk this week, and while the momentum favours long equity, short USD for a tactical short-term trade, a hot CPI number will hurt,” said Chris Weston, head of research at Pepperstone.

“Psychologically, a number below 8% could offer relief for risky assets, even if core inflation should increase a touch to 6.1%.”

Besides facing the hawkish stance from global central banks to curb inflation, the Aussie has also been undermined by economic worries in China and Europe, with some analysts expecting it could test this year’s low of $0.6682 on more negative news about the global outlook.

On Monday, Australian government bond futures were steady, with the yield on the ten-year contract hovering around 3.585%.

The spread over US Treasuries remained little changed at 26 basis points.