The Australian dollar stayed near a three-month high on Friday but struggled to trade above crucial chart resistance of 77 US cents after breaching that level three times this week. The Australian dollar held at $0.7701 after briefly popping up to $0.7732 on Thursday, a level not seen since November 10. It quickly fizzled to as low as $0.7684 in early dealing before inching back towards 77 US cents. The Aussie is set to end the week slightly higher, having traded in a sideways direction since the beginning of February.
Still, the currency is already up nearly 7 percent this year, led largely by expectations of faster inflation in the United States and globally. Elsewhere, the Aussie inched higher against its New Zealand cousin to stay near a 3-1/2 month peak. It came off a 1-1/2 year top on the euro and held near a more than one-year top on the yen.
The New Zealand dollar held its ground just above $0.7200 for a second day on Friday.
The currency was set for a modest weekly gain of 0.2 percent, after falling 1.5 percent the previous week. New Zealand government bonds gained, sending yields three basis points lower at the short end of the curve. Australian government bond futures eased, with the three-year bond contract down 1 tick at 97.93. The 10-year contract slipped 1.5 ticks to 97.155.
The price of Australia's biggest earning export - iron ore - has also soared in recent months, boosting terms of trade and in turn the country's national income. "The Aussie has been in real demand this week on the back of the reflation trade and perhaps is a little overextended," said Stephen Innes, senior trader at OANDA.
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