Australia, New Zealand dollars firm vs US dollar, but slip vs speedy yen

[SYDNEY] The Australian dollar retook some ground on Friday, while its New Zealand peer held gains on the US dollar, but the Antipodean currencies were on track for heavy monthly losses versus the yen.

The Australian dollar edged up to US$0.7642, from a low of US$0.7570 on Thursday, but it met resistance around US$0.7660.

It has slipped 1 per cent this week after surprisingly low inflation figures for the first quarter prompted markets to price in a greater chance of a cut in interest rates.

The Reserve Bank of Australia (RBA) holds its monthly policy meeting on May 3 and while the vast majority of economists still expect rates to be held steady at a record low of 2.0 per cent, 11 out of 49 respondents polled by Reuters forecast a cut.

Interbank futures imply around a 50-50 chance of a cut, up from 1-in-10 earlier in the week.

The big mover of the day was the yen which flew across the board after the Bank of Japan surprised markets by declining to adopt fresh stimulus on Thursday.

The Aussie skidded to 82.05 yen, on track to post a monthly drop of 5 per cent. The New Zealand dollar fell to 74.82 yen, having dropped 3 yen this month.

But the Aussie managed to recoup some ground against its kiwi neighbour at NZ$1.0961, from a two-month trough of NZ$1.0914 touched twice this week.

The New Zealand dollar was trading higher after the Reserve Bank of New Zealand (RBNZ) kept rates on hold on Thursday and sounded slightly less dovish than some had expected.

The Kiwi rose to US$0.6970, driven up by a number of factors to again test the US$0.70 level, ANZ Bank said in a note.

"Firstly, the USD is on the back foot and the market has concluded the Fed remains cautious. The second is that the RBNZ message was also interpreted as less dovish than before," ANZ said.

The kiwi was on track for a monthly increase of nearly 1 per cent in the third consecutive month of gains.

Domestically news that business confidence inched higher in April added to support for the Kiwi. ANZ expected the kiwi to trade in a range of US$0.6920 to US$0.7020 in the short term.

New Zealand government bonds gained slightly with yields down 1 to 2 basis points in the middle of the curve.

Australian government bond futures were firm, with the three-year bond contract up 2 ticks at 98.160. The 10-year contract edged up 1 tick to 97.4950, while the 20-year contract gained 1 tick to 96.9150.

REUTERS