Australia, NZ dollars set for strong weekly gains as US dollar sags

SYDNEY: The Australian and New Zealand dollars eased off highs on Friday but were on track for solid weekly takings as global risk appetite was bolstered by the promise of easy monetary policy settings by the US Federal Reserve.

The Australian dollar, a liquid proxy for risk, was last off 0.2% at $0.7734, within kissing distance of Thursday's three-week high of $0.7761. The Aussie is facing key chart resistance around $0.7849.

For the week, the Aussie is up 1.5% for its second consecutive weekly rise.

The New Zealand dollar was down 0.2% at $0.7157 as it flirted with a 3-1/2 week top of $0.7180 touched on Thursday.

The kiwi successfully cleared resistance at $0.7070 with its next targets at $0.7187 and $0.7268.

New Zealand's currency has climbed 1.8% this week so far, clocking its third straight weekly gain.

Strong domestic data in recent weeks, the opening of a quarantine-free "trans-Tasman bubble" between Australia and New Zealand from next Monday and the success of both countries in curbing the coronavirus pandemic have together aided investor sentiment.

Expectations monetary policy settings will remain accommodative across the developed world for some while yet have further boosted risk appetite.

"The Fed is unlikely to do anything to upset the economic momentum, as it wants a very strong economy in order to return to full employment as soon as possible, minimise scarring and push inflation back above 2.0%," ANZ analysts said in a note.

The US dollar is headed for its worst back-to-back weekly drop this year.

"Stable risk appetite supports AUD crosses. AUD risks are balanced," ANZ added.

Solid data from China, showing its economy expanded by a record 18.3% in the first quarter also aided sentiment. China reported a sharp acceleration in first quarter growth, though the reading slightly undershot expectations.

New Zealand government bonds rose, sending yields about 3-5 basis points lower.

Australian government bond futures edged up, with the three-year bond contract 1 tick higher at 99.750. The 10-year contract was up 4 ticks at 98.31.