The Australian dollar headed for a second consecutive weekly loss on Friday as investors dialled back Australian interest rate expectations, while the prospect of a rate hike in New Zealand next week had the kiwi on course for a weekly gain.

The Aussie hit a three-week low overnight at $0.6605 and was steady just above that at $0.6622 on Friday. Supports lie at April’s low of $0.6573 and a March trough of $0.6564, and breaks there open the way to a slide to $0.64.

This week data showed Australian employment unexpectedly fell in April, a sign the red-hot labour market might be cooling and bolstering the case for a pause in hikes.

At the same time solid data and hawkish rhetoric from US Federal Reserve officials have raised the risk of further US rate rises.

“The Aussie remains on a downtrend and close to its year-to-date lows,” said Commonwealth Bank of Australia strategist Joe Capurso. “A follow-up rate hike by the Reserve Bank of Australia in June is now unlikely,” he said.

“If the RBA does not hike in the next few months, a rate cut is more likely to be the next interest rate change … we still expect AUD/USD to end the quarter at 0.64 - the risk is it reaches that level sooner.”

The Aussie is down about 0.3% against the US dollar on the week.

The kiwi, by contrast, is up 0.7%. It was 0.2% higher and hanging on above its 50-day moving average at $0.6235.

Australian dollar dips on soft jobs data, kiwi edges up after budget

Analysts polled by Reuters expect a 25 basis point hike next week, though markets are rapidly pricing in a risk it goes even larger as migration and a relatively big spending budget keep inflationary pressures going.

Benchmark New Zealand two-year interest rate swaps have jumped 50 basis points this week.

Australian government bonds have been under pressure, with three-year futures down 12 ticks on Friday to 96.68 and 10-year futures down 11 ticks to 96.40.