Australian dollar holds near 12-week peaks, bonds slide on rate risk

SYDNEY, Aug 27 (Reuters) - The Australian dollar held near 12-week highs on Thursday on ramped-up bets of an imminent rate hike after strong inflation and spending data, sending bond yields to their highest in months.

The Aussie AUD=D3 rose 0.2% to $0.7184, having hit a 12-week top of $0.7189 overnight before paring gains. It faces resistance at $0.7200 and $0.7277, while support lies around $0.7110 and $0.6920.

Australia's household spending jumped 1.1% in July, data showed on Thursday, suggesting consumer demand remained resilient despite higher borrowing costs. That added to a hot inflation report on Wednesday that had swap markets pricing a rate hike from the Reserve Bank of Australia (RBA) next month as a coin toss, at 53% probability.

"The spending indicator is measured in nominal terms, with today's strength reflecting a combination of higher prices and stronger volumes," said Jessie Cameron, an economist at the National Australia Bank, which is tipping a rate hike in September.

"If higher prices are driving spending growth, it reinforces concerns that inflation is elevated. If stronger volumes are driving outcomes, it would suggest household demand is proving more resilient."

Citi has also forecast a rate hike in September, citing resilient household spending and persistent inflation.

Three-year government bond yields AU3YT=RR rose 7 basis points to 4.682%, the highest in a month, after already leaping 5 bps a day earlier. Ten-year bond yields AU10YT=RR jumped 8 bps to 5.095%, the highest since May.

The RBA held interest rates steady at 4.35% for a second meeting this month after three rate hikes this year, but policymakers have warned of even higher rates if inflation risks materialise.

The kiwi dollar NZD=D3 edged up 0.1% to $0.5952 on Thursday, after falling 0.5% overnight as the greenback firmed on strong U.S. inflation data. Major resistance is around the double top at $0.5990.

The Reserve Bank of New Zealand meets next Wednesday, and markets imply a 96% chance it will lift the official cash rate 25 bps to 2.75%, its second hike in a row. 0#NZDIRPR

Investors see rates reaching 3.0% by December and 3.5% next year as the central bank shifts from outright stimulus to a more neutral policy stance.

(Reporting by Stella Qiu; Editing by Jacqueline Wong)