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NZ, Australia dollars poised for large weekly gains as central banks help

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The New Zealand and Australian dollars edged off highs on Friday on growing jitters over the upcoming Brexit vote, though both currencies were on track for hefty weekly increases.

[SYDNEY] The New Zealand and Australian dollars edged off highs on Friday on growing jitters over the upcoming Brexit vote, though both currencies were on track for hefty weekly increases.

The New Zealand dollar nudged down to US$0.7104, from US$0.7135 early. It climbed to a one-year peak of US$0.7148 on Thursday after the central bank held rates at a record low of 2.25 per cent and appeared less dovish than the market was expecting.

It has jumped more than 2 per cent so far this week against most currencies. "The NZD has been the star performer, following the RBNZ's Monetary Policy Statement," said BNZ FX Strategist Jason Wong.

"The market's take was that NZ's high interest rate premium to the rest of the world would be maintained and that was a good reason to buy the NZD," said Mr Wong.

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The market trimmed the risk of an easing to 2.03 per cent by November, from 2.01 per cent before the policy review and is no longer fully priced for a cut.

The euro plumbed its lowest since early January at NZ$1.5836 . It was last at NZ$1.5908, having skidded 2.6 per cent this week.

The kiwi even outpaced a broadly healthy Australian dollar which slipped to a 13-month low of NZ$1.0407 on Thursday. It has steadied to NZ$1.0439, but was still on track for a weekly fall of 1.4 per cent.

Elsewhere, the Australian dollar marked time at US$0.7412, having been repelled by a wall of resistance ahead of US$0.7515 on Thursday. It was still up for a second consecutive week with a gain of 0.6 per cent.

Dealers said the Aussie was likely to consolidate around the 74 US cents ahead of an Australian public holiday on Monday.

The Aussie has powered up more than one per cent this week against the euro, yen and pound.

The bounce came after the Reserve Bank of Australia (RBA) wrong-footed doves with the omission of a clear easing bias in its monthly policy review statement.

The RBA on Tuesday kept rates at a record low of 1.75 per cent, taking a pause after last month's cut and recent data showing reasonable strength in the economy.

In the bond market, growing concerns about Britain's looming referendum and global growth made investors look for safe-haven assets.

New Zealand government bonds gained, sending yields three basis points lower at the short end and 3.5 basis points lower at the long end.

Australian 10-year cash yields touched an all-time low of 2.1 per cent. They reached 2.6 per cent late April.

Australian government futures ran into profit-taking following recent hefty gains with the three-year contract off three ticks at 98.420.

The 10-year contract shed 1.25 ticks to 97.8950, having climbed to a fresh record peak of 97.9150. The 20-year contract was 0.75 ticks softer at 97.3025.

REUTERS

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