Australia, NZ dollars near 3-week peaks, hold hefty weekly gains

[SYDNEY] The Australian and New Zealand dollars held near three-week highs on Friday as their US counterpart's bullish run came to a screeching halt, putting them on track for a strong start to the year.

The Australian dollar was steady at US$0.7330, having rallied 0.7 per cent overnight when it touched a three-week high of US$0.7356.

It has gained nearly 2 per cent this week, and if sustained, it would be the largest such increase in about a year. Resistance was found at the Dec 16 top of US$0.7370 with support around US$0.7330.

The currency received a further fillip after Australia boasted its first trade surplus in almost three years in November, as surging commodity prices boosted export earnings beyond all expectations.

Exports jumped by 8.4 per cent, or a whopping A$2.3 billion (S$2.4 billion), with iron ore and coal, Australia's top exports, each showing double-digit gains.

The trade surplus will likely mean that Australia's economy will just manage to escape recession, said Paul Dales, chief economist for Australia & New Zealand at Capital Economics.

Australia's gross domestic product shrank for the first time since 2011 in the third quarter, raising the spectre of a possible recession following 25 years of growth.

Investors are now focused on Friday's US non-farm payrolls report in which economists expected job gains of 178,000 in December.

The New Zealand dollar touched its highest in three weeks at US$0.7040, to be last at US$0.7014. It has gained 1.1 per cent this week and the next big level is US$0.7050, the 61.8 per cent retracement of its December fall.

A dearth of domestic data has seen the kiwi track to the whims of the US currency in recent days.

The country's central bank holds its next policy meeting on Feb 9 and is considered certain to keep rates at 1.75 per cent, with the market wagering it will remain there for much of the coming year.

New Zealand government bonds extended their rally, with yields falling as much as 6 basis points at the longer end. Yields on 10-year paper have dropped 30 basis points in just five sessions.

Australian government bond futures rose, with the three-year bond contract up 3 ticks at 98.010. The 10-year contract added 4.5 ticks to 97.2650, while the 20-year contract gained 6.5 ticks to 96.6400.

REUTERS