SYDNEY: The Australian and New Zealand dollars recouped overnight losses on Tuesday as the greenback was pressured by a retreat in US yields following a global bond market rout last week.

The Aussie was hovering at $0.6690, after recovering all of its losses overnight to $0.6624 from weak China inflation data.

It has traded largely rangebound in the past two weeks, with resistance at 67 cents and support at 66 cents.

The kiwi was fetching $0.6220, having also pulled off a low of $0.6167 overnight and eked out a slight gain of 0.05%. Resistance is at $0.6219, with support around $0.6180.

The dollar index touched a two-month trough of 101.84 on Tuesday morning against a basket of major currencies, pressured by a retreat in US yields after a rout in the bond market.

A survey from the New York Federal Reserve showed that near-term US inflation expectations are falling, and comments from a few Federal Reserve officials that the end of the rate-hike cycle is close helped ease fears of more aggressive tightening down the road.

Markets are now looking to US inflation data out on Wednesday.

They currently have fully priced in a hike in July, with a 30% chance for another increase by November.

Westpac sees the Australian dollar trending higher to 69 cents by the end of the year, compared with the previous projection of 74 cents.

“This reflected Australia remaining a ‘low yielder’ and the likelihood that the global pressures which will emerge in 2023 will not see the Australian dollar as the ‘safe haven’ choice,” said Bill Evans, chief economist at Westpac.

Australia, NZ dollars slip on China inflation miss, nurse losses on yen

At home, Australia’s consumer sentiment bounced a little in July after inflation cooled, while business conditions were steady following a marked the slowdown in the previous month.

Local bonds rebounded, with the three-year Australian government bond yields easing 4 basis points to 4.196%, and the ten-year also falling 4 bps to 4.235%.