After hitting a two-week low against the yen on Friday, the Australian dollar came back Monday after negative US economic data late last week pushed back expectations of a rate hike by the Federal Reserve.

The Australian dollar had slipped 1.4 per cent to 77.88 yen by the end of last week, the lowest level since July 12. But both the Aussie and the kiwi turned around over the weekend with the Australian dollar hitting a two-week high of US$0.7616.

The Aussie's gain of 2 per cent will only add to the case of an interest rate cut by the Reserve Bank of Australia (RBA) which is scheduled to hold its monthly policy meeting on Tuesday. A majority of economists favor a basis point to a new low of 1.5 per cent and Interbank futures put the probability of a move around 60 per cent.

Out of 49 analysts polled by Reuters, 38 expect more stimulus actions, largely to curb an unwelcome slowdown in inflation.

Kiwi Up 2 Percent

The New Zealand dollar paused trading Monday at US$0.7222, having zoomed up nearly 2 per cent on Friday. Analysts believe the currency is marking time ahead of the RBA meeting where a decision to keep the rate steady would most likely see the Aussie rise sharply on the kiwi, while relieving pressure for a policy easing at home.

The Reserve Bank of New Zealand (RBNZ) will be holding its rate review on August 11 and markets are wagering heavily on a cut.

According to OM Financial Limited private client manager Stuart Ive, "Failure to deliver a clear, concise easing plan when the monetary policy statement is released on the 11th will send the NZD to continue to test higher."