The Australian and New Zealand dollars gained more ground on Friday after strong US economic data boosted investor sentiment, but were still on track to end the week sharply lower as markets remained wary of China. The Australian dollar popped to $0.7184, from $0.7163 early, moving some distance away from a 6-1/2-year trough set on Monday. Key resistance was found at $0.7250 and a break could see a big short-squeeze higher, according to dealers.
Still, the Aussie is down 1.7 percent this week on fears of a hard landing in China's economy. China is Australia's top export market. Markets will be scrutinising the Reserve Bank of Australia (RBA) policy statement due next week for its assessment of the Chinese economy. "It won't be too optimistic about China but I don't think it's going to be too downbeat either," said Joseph Capurso, a strategist at Commonwealth Bank of Australia.
The central bank holds its monthly policy meeting on September 1 and is widely seen keeping rates at a record low of 2 percent. The Antipodean currencies extended gains versus the safe haven yen with the Aussie at 87.15. It is up 7 yen since touching a three-year trough on Monday, but was down 2.4 percent for the week. The New Zealand dollar suffered most this week with a 3.4 percent decline, its second-largest weekly loss this year. It was last at 78.59 yen.
The kiwi edged up 0.4 percent to $0.6487, recovering from a six-year low of $0.6200 earlier in the week. New Zealand government bonds eased, pushing yield 2 basis point higher along the yield curve. Australian government bond futures dipped, with the three-year bond contract off 4 ticks at 98.170. The 10-year contract was down 3 ticks to 97.2350.
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