SYDNEY: The Australian and New Zealand dollars were headed for a third consecutive week of declines on Friday, undermined by dovish local rate outlooks, as traders looked ahead to a key US jobs report to see whether rates there have peaked.

The Aussie was 0.3% higher to $0.6570, after hitting a two-month trough of $0.6514 overnight.

Sentiment steadied after Chinese shares rose on hopes of more policy easing and Beijing decided to lift tariffs on Australian barley.

Still, the Aussie is headed for a 1.2% drop for the week and is down 4% in the past three weeks.

Australia, NZ dollars on defensive as yields move against them

Resistance lies at 66 cents while major support is at the 2023 low of $0.6458.

The kiwi dollar rose 0.2% to $0.6091, having also plumbed a two-month low of $0.6063. It is set for a 1% drop on the week, with the next level of support at $0.5986.

“Whether or not the RBA is done raising rates is going to be important for AUD’s performance between now and year end,” said Ray Attrill, head of FX research at NAB.

“Suffice to say, our current 0.72 year-end forecast is challenged if an RBA peak at 4.10% is now in.”

The Reserve Bank of Australia (RBA) on Friday trimmed its outlook for economic growth and prices in a quarterly Statement on Monetary Policy (SoMP).

The central bank said inflation was heading in the right direction and providing time to consider whether further interest rate rises would be needed.

“While acknowledging multiple uncertainties, the SoMP hints at increasing confidence that policy settings are appropriate and ‘restricting economic activity,’” RBC Capital Markets Chief Economist Su-Lin Ong said. “It will do little to shift expectations that this policy cycle is drawing to an end, if not already there.”

Futures suggest the RBA may be done tightening, with an even chance of another rate hike by the end of the year.

In the bond market, investors are finding Australian bonds attractive again after US has hugely increased its borrowing needs while Australia is trimming its issuance.

Ten-year Australian bonds now pay as much as Treasuries, having offered 10 basis points less a session earlier.

Yields jumped 9 basis points to 4.178% on Friday.


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