Australian, NZ dollars rally as benign US inflation cools Fed hike bets

Meanwhile, data showed New Zealand's home prices fell 0.9% in June, failing to shake off a years-long funk with the economic recovery remaining fragile.

Data from China showed economic growth slowed sharply to 4.3% in the second quarter, the lowest in 3-1/2 years. However, the weaker-than-expected figures failed to have a material impact on the Aussie and kiwi, which are often sold as proxies for the Chinese yuan due to their countries' reliance on Chinese demand.

The closely watched U.S. consumer inflation data for June surprised on the downside, with the headline measure falling 0.4% on a monthly basis and core inflation flat. Treasury yields slid and the U.S. dollar slumped as markets priced out the risk of imminent Fed hikes, with odds for July halving to 16%.

By contrast, the Reserve Bank of New Zealand is widely expected to raise interest rates again in September, with rates reaching at least 3.0% by year-end, underpinning the kiwi.

Despite the recent rally in the New Zealand currency, analysts at ANZ cut their year-end forecast to 60 cents from 64 cents, noting that the nation's interest rates were still much lower than those in the U.S.

"If the domestic economic outlook gets challenged, that could be a headwind for the kiwi," said David Croy, a senior rates strategist at ANZ, adding that 2026 is an election year locally, which could also bring uncertainties.

SYDNEY, July 15 (Reuters) - The Australian and New Zealand dollars extended gains on Wednesday after surprisingly soft U.S. inflation data cooled bets for Federal Reserve rate hikes, with the kiwi getting an added boost from hawkish rate expectations at home.

The kiwi dollar NZD=D3 rose 0.2% to $0.5822, having jumped 1.1% overnight to hit a one-month peak of $0.5859. That helped it climb back above the 200-day moving average at $0.5819, with bulls eyeing resistance at the mid-June high of $0.5865.