[SYDNEY] The Australian dollar recovered from a near one-month low on Friday on the back of buoyant commodity prices and a record government bond sale, while the pound tumbled on lingering worries about a "hard Brexit".
The Australian dollar rose 0.4 per cent to US$0.7601 for its third straight day of gains. It is slightly up on the week, defying the strength in the greenback which rose on growing expectations of a rate rise in the United States by year-end.
The Australian government this week issued its longest and largest syndicated deal ever, at A$7.6 billion with 65 per cent of bonds going to foreigners.
The Reserve Bank of Australia (RBA) highlighted a revival in prices for resource exports when it left interest rates unchanged this month, after cuts in August and May. The futures market has recently also slashed the probability of another rate cut this year.
"Higher bulk commodity prices... could eliminate the trade deficit in Australia," said Shane Oliver, chief economist, at AMP Capital.
"Given this, along with reasonable economic growth and the rising prospect of a December US rate hike taking upwards pressure off the Australian dollar, the probability of a November RBA rate cut is rapidly collapsing."
The RBA on Friday cautioned on high household debt levels and the risk that excessive borrowing to build and buy apartments could end in tears given looming supply.
The Aussie has now traded in a 75 to 77 US cent range for more than three weeks.
"How we end the week matters for the medium-term outlook. If it closes below US$0.7570 it would be the weakest finish in a month and signal that chart support at 75 US cents could come under assault soon," said Greg McKenna, chief market strategist at AxiTrader.
Elsewhere, the pound is set for its fifth straight weekly loss against the Aussie and is down almost 9 per cent since mid-September. The pound has been hit by anxiety about a "hard Brexit" in which Britain leaves the European Union's single market in order to impose controls on immigration, disrupting access to the country's main trading partner.
The Aussie was flat on its New Zealand counterpart, not far from a more than two-month peak hit earlier in the week.
The New Zealand dollar edged up from a 2-1/2 month trough to trade at US$0.7117. It was heading for its second weekly fall as expectations increased for another rate cut by the Reserve Bank of New Zealand.
New Zealand government bonds slipped, sending yields one basis point higher across the curve.
Australian government bond futures eased, with the three-year bond contract down four ticks at 98.29. The 10-year contract fell 2.5 ticks to 97.755.