SYDNEY, April 15 (Reuters) - The Australian and New Zealand dollars bounced on Monday after a steep sell-off last week triggered by mounting concerns of a widening conflict in the Middle East, while still-solid carry trade demand from Japanese yen also helped the two steady.
The Aussie was up 0.3% to $0.6485, having suffered a 1.1% slump on Friday to as low as $0.6456, the lowest in two months. The 200-day moving average of $0.6541 is proving heavy resistance after a weekly drop of 1.7%, the biggest since November.
The kiwi edged 0.2% higher at $0.5950, after falling 1.0% on Friday to as far as $0.5934, the lowest in five months. It fell 1.3% last week.
Both had taken a hit on Friday as markets braced for an Iranian attack on Israel in response to a suspected Israeli attack on Iran's Syria consulate on April 1.
Iran launched explosive drones and fired missiles at Israel late on Saturday, but that caused only modest damage, with most shot down by Israeli defence systems and with help from its allies.
"It was obvious you know what Iran did basically didn't create any sort of major collateral damage inside Israel, either human or physical capital. You know, I think it was a case of the market sold the rumor and bought the fact this morning basically," said Ray Attrill, head of FX strategy at National Australia Bank.
"Our short term view is that the range (for AUD from 6450 to 6650) holds and unless or until we trade clean below 6450 probably on a closing basis rather than just intraday, then our view is that we're still in a range here," said Attrill.
The Aussie was also buoyed by carry trades as investors borrowed the Japanese yen to buy higher-yielding currencies. It jumped 0.7% to 99.72 yen, recovering from a 1.2% slump on Friday.
Australian bonds steadied after a week of heavy losses thanks to a shift in global interest rate expectations. Three-year bond futures rose 3 ticks to 96.2 after losing 18 ticks last week. Ten-year bonds gained 3 ticks to 95.75.
In New Zealand, all eyes are on the consumer inflation report due on Wednesday for clues on when the Reserve Bank of New Zealand might start to cut rates.
Economists expect consumer prices rose at 0.6% in the first quarter from the previous quarter, ticking up from a 0.5% gain in the December quarter.
Traders have fully priced in a rate cut in October, with a total easing of 42 basis points expected this year. (Reporting by Stella Qiu; Editing by Jamie Freed)
