Australia, NZ dollars nurse ECB-caused losses, set for weekly gains

[SYDNEY] The Australian dollar steadied on Friday after it was knocked down from a three-week high when the European Central Bank (ECB) offered no hint of further near-term easing, although the currency remained on track for a weekly gain.

The Australian dollar stood at US$0.7646 on Friday after once again failing to stay above 77 US cents after breaching that level.

The fall for the Aussie came after the euro jumped to a one-week high of A$1.4712. After a policy meeting on Thursday, ECB head Mario Draghi said further expanding its asset-purchase program had not even come up for discussion.

The Aussie fared better against the greenback, helped by ongoing uncertainty about the timing of a US rate hike.

For the week, the Aussie is up nearly one per cent. It topped out at US$0.7732 on Thursday, on a combination of soft US economic data and news the Australian economy grew at its fastest pace in four years last quarter.

The Aussie has risen about 5 per cent this year. Analysts say the currency's direction will largely depend on when the US Federal Reserve decides to move.

Staying above 77 US cents "would be a big story. But for now the charts and the price action suggest, unless the US dollar weakens significantly from here, the Aussie will continue to be capped," said Greg McKenna, chief market strategist at Sydney-based AxiTrader.

The New Zealand dollar was trading slightly higher on Friday at US$0.7396. It has risen 1.5 per cent this week on the back of a weaker greenback and stronger global dairy prices.

"Consolidation is never a good phrase to hear from a trading perspective but today looks like it will be exactly that," said Stuart Ive, OM Financial Ltd private client manager.

Longer-term players are beginning to eye whether the RBNZ will act on the currency and whether the Federal Reserve "pulls the pin and hikes in September," said Mr Ive.

New Zealand releases GDP figures next week which are expected to show the economy sped ahead in the second quarter, which should keep the kiwi underpinned.

New Zealand government bonds eased, tracking global moves after the ECB's meeting. Yields were up two basis points at the short end and seven basis points at the long end.

Australian government bond futures fell too, with the three-year bond contract down eight ticks at 98.47. The 10-year contract slipped 10 ticks to 98.025.

REUTERS