SYDNEY (Reuters) - The Australian and New Zealand dollars paused on Tuesday after climbing for two straight sessions amid a rebound in broader risk sentiment which saw global equities rally strongly.
The Australian dollar <AUD=D4> held at $0.7851, well above the more than one-month trough of $0.7759 made last week.
The New Zealand dollar <NZD=D4> was last at $0.7250, again clear of the recent one-month low of $0.7176.
"In the Aussie's case the turn around in stocks is a key part of the flight higher. Risk appetite hardly ever fails to give the Aussie a lift," said Greg McKenna, chief market strategist at AxiTrader.
World shares rallied on Monday in a broad advance as investors shifted asset allocations and tried to put last week's worst rout in two years past them.
Meanwhile, the U.S. dollar remains on the backfoot amid concerns over the United States' exploding budget deficits and ahead of CPI data on Wednesday.
Median forecasts are for consumer price inflation to slow a little to 1.9 percent in January, mainly due to the base effect of a high reading last year dropping out of the calculation. The core measure is seen ticking down to 1.7 percent.
A result in line with or below expectations would likely be a big relief for financial markets, while anything higher could well spook investors again, lift bond yields and batter stocks.
Domestically, data out on Tuesday showed Australian business conditions reached near-boom levels in January as sales and profits increased sharply.
But that is yet to pave the way for stronger wage growth.
Reserve Bank of Australia (RBA) Assistant Governor Luci Ellis on Tuesday cautioned that any pick up in wage growth was likely to be slow, weighing on household incomes and spending power amid high levels of debt.
The RBA has kept interest rates at a record low 1.50 percent since August 2016 and has given a clear signal that policy will stay neutral for a long time to come.
Interest rates are staunchly on hold in New Zealand too, at a record low 1.75 percent as policymakers try to stoke inflation.
A central bank survey of inflation expectations in New Zealand for the first quarter is due on Thursday.
The results could drive the kiwi lower if they showed inflation expectations had dropped after a weaker outcome for the consumer price index last quarter.
New Zealand government bonds <0#NZTSY=> rose, sending yields 2.5 basis points lower at the long end of the curve.
Australian government bond futures inched higher, with the three-year bond contract <YTTc1> up 2 ticks at 97.865. The 10-year contract <YTCc1> added 3 ticks to 97.1250.
(Reporting by Swati Pandey; editing by Richard Pullin)
