By Swati Pandey and Rebecca Howard
SYDNEY/WELLINGTON, Oct 17 (Reuters) - The Australian dollar slipped on Monday to unwind some of its gains from last week, with the greenback strengthening as positive economic data stoked expectations of a U.S. rate hike as early as December.
The Australian dollar AUD=D4 was off 0.3 percent at $0.7592. It had been among the best performing major currencies last week on the back of buoyant commodity prices and a record Australian bond sale that saw heavy offshore interest. traders will look for further cues in a speech by Reserve Bank of Australia (RBA) Governor Philip Lowe on Tuesday. Minutes of the RBA's October policy meeting are also due later that morning, followed by jobs data on Thursday.
"Higher commodity prices supported the recent lift in AUD because it points to a faster recovery in Australia's terms of trade and a narrower trade deficit," Elias Haddad, senior currency strategist at CBA, said in a note.
Haddad expects iron ore and coking coal prices to edge further higher on hopes of stronger economic data from China this week.
"That, combined with our expectations of a solid increase in September Australian employment, can further underpin the AUD."
Meanwhile, data on Friday from the United States showed retail sales rose 0.6 percent in September, while producer prices showed a pickup in inflation - the latest sign that the world's largest economy regained momentum in the third quarter after a lacklustre first half. ECONUS
That saw U.S. Fed Futures raising the probability of a December rate hike to about 70 percent, from 65 percent last week.
Elsewhere, leveraged funds added nearly $7 billion to net long positions on the greenback, the largest weekly increase since August 2014, according to ANZ Research.
The New Zealand dollar NZD=D4 inched 0.2 percent higher to $0.7100.
Attention is on New Zealand's inflation data on Tuesday, which is expected to show a further slowdown to just 0.1 percent in the year to September, all but guaranteeing a November rate cut from the Reserve Bank of New Zealand.
ANZ Senior Economist Philip Borkin expects the Kiwi to stay resilient as the market has already priced in a Fed rate hike and a cut from RBNZ this year.
"The NZD/USD will struggle to push much lower unless risk-appetite deteriorates significantly, or the tone of the domestic data flow turns," said Borkin.
Short-term chart support is seen at $0.7070 and $0.7025, while a band of resistance lies at $0.7120/40.
New Zealand government bonds 0#NZTSY= eased, with yields higher across most of the curve. Yields were up 5 basis points at the long-end.
Australian government bond futures fell, with the three-year bond contract YTTc1 down 2 ticks at 98.280. The 10-year contract YTCc1 fell 0.55 ticks to 97.7050.