Australian dollar jumps to a month-high at $1.0194, up 3 percent in the week, making the Aussie the star performer of all the major currencies.
Resistance at its Jan 3 high of $1.0248, before the 28-year high of $1.0257, with support at $1.0083.
The Aussie rally follows an RBA quarterly monetary policy statement showing a resolute upbeat tone about the longer term economic outlook despite recent floods, a source of concern for markets.
Markets now pricing 36 bps rate hike in the next 12 months, up from 24bp before the RBA statement.
Australian bond futures down sharply, with the three-year contract off 0.11 points at 94.140 and the 10-year contract off 0.07 points at 94.310.
RBA trims gross domestic product (GDP) forecast in 2010 to 2.75 percent from 3.5 percent due to Queensland floods but raises 2011 GDP expectations to 4.25 pct from 3.75 pct due to rebuilding activity later this year.
CPI inflation for 2011 also seen up at 3 pct from a previous forecast of 2.75 pct although underlying rate is seen unchanged at 2.75 pct. All that within the bank's target of 2.0 to 3.0 pct.
RBA left cash rate unchanged at 4.75 pct this week, having previously hiked by 175 basis points since Oct 2009.
A run of strong global data this week has augured well for commodity demand and helped copper touch $10,000 overnight, while iron ore held near record peaks.
Aussie also helped after the devastation caused by Cyclone Yasi was not as bad as feared, and there were no deaths or serious injuries.
The euro dives to Australian $1.3368, shedding 2.6 percent this week. Recently investors have been buying euro/Aussie on a view the ECB would start to tighten while the RBA stayed on hold because of the floods.
Overnight, ECB chief Trichet poured cold water on thoughts of an early hike in Europe, knocking the euro down.
The New Zealand dollar stuck around $0.7730, having retreated from a $0.7830 high earlier in the week.
It was knocked lower by further weak jobs and building data and comments from the Finance Minister, that are being seen as further reasons for the central bank to keep rates on hold for longer.
Market pricing trims chances of NZ rate rises resuming in July to around 40 percent, and even a September start is only seen around 70 percent chance. Only 53 basis points of rate rises seen over the next 12 months.
NZ migration gains increased slightly in December to a net 750 from a revised 620 in previous month, but the annual gain of 10,451 was only half of the previous December year, showing no stimulus for local demand from a rising population.
NZ new car registrations up nearly 25 percent in January on previous month to be 10.9 percent above a year ago. A rise in car sales has boosted retail data at end of 2010 but ex-auto figures have been soft.
The diverging outlook between the Australian and New Zealand economies brings the Aussie/kiwi cross near a one-month high at around NZ$1.3153.
New Zealand government debt turn flat after a soft open, as U.S. Treasuries fall on inflation fears.