SYDNEY/WELLINGTON (Reuters) - The Australian and New Zealand dollars eased from more than one-month highs on Monday with trading expected to be volatile in a week when both countries' central banks hold policy meetings and U.S. mid-term elections preoccupy financial markets.
The Australian dollar <AUD=D4> was last at $0.7195, easing from Friday's $0.7259, which was the highest since Sept. 27, after solid U.S. jobs data cemented expectations for a December rate rise.
The New Zealand dollar <NZD=D4> inched lower to $0.6644 from Friday's peak of $0.6689, a level not seen since late September.
The Reserve Bank of Australia (RBA) meets on Tuesday when it is widely expected to keep interest rates unchanged at 1.50 percent for the 27 consecutive policy meetings. The RBA will publish its official forecasts for inflation and economic growth on Friday.
Its New Zealand counterpart is seen as all but certain to hold its policy rate at a record low 1.75 percent after its meeting on Thursday. The market, however, is hoping to see a more hawkish tone in its comments after the meeting, failing which there could be a sell off in the currency, analysts said.
The kiwi will also be tested this week with a closely-watched employment and wage data due out Wednesday.
Westpac said in a note it remains bearish on the NZ dollar in the medium term, targeting sub-0.64 by year-end.
"The US dollar should continue to strengthen this year if the Fed hikes three more times as we expect. In addition, the NZ-US yield spread could decline even further," said Imre Speizer, head of NZ Strategy at Westpac.
The kiwi bounced 2.3 percent last week, putting up its best weekly show since early 2017 on short-covering and a strong rally in risk assets globally. The Aussie jumped 1.5 percent last week.
Elsewhere, investors keenly await Chinese President Xi Jinping's speech later in the day for any clues on the course of an ongoing Sino-U.S. trade war, with markets reacting to even the most minor piece of news in the dispute.
Global financial markets are also expected to be jittery ahead of U.S. congressional midterm elections on Tuesday.
Opinion polls show a strong chance that the Democratic Party could win control of the House of Representatives after two years of wielding no practical political power in Washington, with President Donald Trump's Republican Party likely to hold the Senate.
New Zealand government bonds <0#NZTSY=> eased, sending yields about 5 basis points higher at the longer-end of the curve.
Australian government bond futures slipped, with the three-year bond contract <YTTc1> off 2 ticks at 97.860. The 10-year contract <YTCc1> fell 3 ticks to 97.265.
(Reporting by Swati Pandey and Praveen Menon; editing by Eric Meijer)
