By Cecile Lefort and Swati Pandey
SYDNEY/WELLINGTON, Nov 2 (Reuters) - The Australian and New Zealand dollars were on tenterhooks on Monday ahead of a week packed with events, including an interest rate decision by the Reserve Bank of Australia.
The Australian dollar was briefly squeezed to a high of $0.7150, from $0.7138 late on Friday, after a survey showed signs of some stability in China's manufacturing sector.
But it faded back to where it started at $0.7140 as the underlying data were too mixed to ease worries about growth in the Asian giant.
Over the weekend, an official survey showed activity in China's manufacturing sector unexpectedly contracted in October for a third month and renewed fears the economy may still be losing momentum despite a raft of stimulus measures.
Support was found at $0.7068, a one-month low touched on Friday and resistance at $0.7187. The Aussie ended three months of losses in October with a gain of 1.7 percent.
The Aussie held near one-month lows against the yen and pound AUDJPY=R GBPAUD=R and touched a six-month trough of NZ$1.0478 against its kiwi cousin.
The Aussie was likely to remain subdued ahead of the RBA's policy meeting on Nov. 3.
A benign report on inflation added to speculation the central bank might choose to cut rates to a record low of 1.75 percent, though the vast majority of analysts in a Reuters poll doubted it would move so soon.
"The RBA still sees emerging signs of the much hoped for transition of domestic growth from mining to non-mining sectors," said John Peters, a senior economist at Commonwealth Bank of Australia, citing a lower Aussie as a supporting factor.
Interbank futures give a 38 percent chance of a move this week, rising to 72 percent for the December meeting.
The New Zealand dollar NZD=D4 was also cautious at $0.6775, from $0.6762 late on Friday. It jumped 5.7 percent in October, the largest monthly gain in two years.
The kiwi touched a four-month peak around 69 cents mid-October, mostly on speculation the Federal Reserve would not raise interest rates this year.
Analysts expect trading to be choppy this week ahead of a global dairy auction and jobs data at home. The market forecasts further weakness in dairy prices at the auction which could weigh on the currency.
New Zealand government bonds edged up, sending yields half a tick lower.
Australian government bond futures had a soft tone, with the three-year bond contract off 1 tick at 98.220. The 10-year contract also shed 1 tick to 97.3500, while the 20-year contract nudged off half a tick to 96.7950. (Editing by Shri Navaratnam)