Australia dollar tops 4-yr high on yen, retreats vs euro

WELLINGTON/SYDNEY: The Australian dollar lost ground to the euro on Friday as central banks in the euro zone and Britain disappointed easing expectations, but vaulted to four-and-a-half year highs on the yen as Japan remains a sure bet for more stimulus.

Immediate focus on China trade figures, and particularly the export and import numbers. The New Year holidays will make it hard to draw conclusions, but any perceived weakness could pressure the Aussie.

NZ has data on government accounts, housing and Q4 manufacturing sales -- one of the final bits of the GDP jigsaw .

With all the action on the crosses, the Australian dollar only inched higher on its US counterpart to $1.0270, from $1.0251 in late local trade on Thursday, having ranged $1.0240 to $1.0291 overnight.

Near term support seen at $1.0220, the previous session's low, with resistance seen at $1.0303, Wednesday's high.

The New Zealand dollar flat at $0.8285, little changed from Thursday, after managing a brief foray to a high of $0.8314 overnight. Support seen at $0.8240 with $0.8320 likely to cap the topside.

In contrast the Aussie and kiwi dollars up sharply on the yen, with the Aussie 1.2 percent higher at 97.40. It reached as far as 97.57, the highest since August 2008.

Kiwi adds 0.9 percent to 78.57 yen, approaching its recent peak around 79.64.

While the Bank of Japan left monetary policy unchanged on Thursday, much more aggressive easing is expected once a new Governor takes office next month.

The euro on track for its largest one-day gain in two months against the US dollar, as European Central Bank President Mario Draghi sounded more sanguine about the EU economy than recent dire data would seem to justify.

Draghi says inflation expectations "remain firmly anchored," in line with the ECB's aim of maintaining inflation rates below but close to 2 percent over the medium term. That should allow the ECB's monetary policy stance to stay loose.

Healthy demand at a Spanish debt auction also eases some investor concerns. Spain sold 5 billion euros of bonds, hitting the top end of its targeted amount at reduced borrowing costs despite political uncertainty in Italy.

Sterling rebounds from a 2-1/2-year low against the dollar after the Bank of England decides not to resume its quantitative easing programme for now.

Investors buoyed by data showing the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, another sign in recent data that the labour market is picking up.

Attention now on US non-farm payrolls data due overnight with expectations of a further 160,000 jobs being added.

The Antipodeans lower against the invigorated euro, which gains 0.7 percent on the Aussie to A$1.2756 after it touched a five-week low the previous session, while adding nearly 1 percent on the kiwi to NZ$1.5816.

However, sterling extends recent losses falling to A$1.4609, having touched a one-year low of A$1.4583. Faring only a little better on the kiwi at NZ$1.8105, hovering close to a lifetime trough around NZ$1.7950 set last month.

New Zealand government bonds with pronounced offered tone, sending yields 3 basis points lower across the curve.

Australian government bond futures ease with the three-year contract down 0.04 points to 97.100, while the 10-year contract loses 0.070 points at 96.520.