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Australia, NZ dollars subdued, Aussie set for first weekly loss of 2017

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The Australian and New Zealand dollars meandered in holiday-thinned trade on Friday, with the kiwi heading for a week of solid gains while the its Aussie cousin was poised to end four weeks of rises.

[SYDNEY] The Australian and New Zealand dollars meandered in holiday-thinned trade on Friday, with the kiwi heading for a week of solid gains while the its Aussie cousin was poised to end four weeks of rises.

Markets in China, South Korea and Taiwan were shut for the Lunar New Year holiday.

The Australian dollar was quoted at US$0.7530, off the 2-1/2-month peak of US$0.7609 touched on Tuesday. Support was found at US$0.7500.

The currency has been unable to stay above 76 cents after disappointing domestic inflation figures released this week underlined the risk that interest rates were more likely to move down than up this year.

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Also undermining the Aussie was a rise in US yields which lifted the US dollar. All of which put the Aussie on track to end the week 0.4 per cent lower. It would be the first decline this year.

Still, the local currency has again proved resilient thanks, in part, to rising prices of iron ore, Australia's top export earner.

Also encouraging was Friday's data showing a 12.4 per cent surge in Australia's export prices.

Across the Tasman sea, the New Zealand dollar was also subdued at US$0.7242, having touched a 2-1/2-month peak of US$0.7314 on Thursday.

It received a boost after data showed inflation was back in the central bank's target range for the first time in two years, suggesting further interest rate cuts were unlikely.

It was poised for its fifth consecutive week of rises with a gain of one per cent.

New Zealand government bonds eased, sending yields 0.5 basis points higher at the long end of the curve.

Australian government bond futures had a mild soft tone, with the three-year bond contract steady at 97.990. The 10-year contract shed three ticks to 97.1750, while the 20-year contract was unchanged at 96.5200.

The premium of Australian two-year government debt over US Treasury bonds rose to 63 basis points, from 60 basis points on Wednesday, which was the smallest in over a decade.

Likewise, the spread on the 10-year bonds edged up to 28 basis points, from a trough of 21 basis points.

REUTERS

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