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Australian dollar bounces after Morrison wins leadership vote; NZ$ treads water

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The Australian dollar bounced off lows on Friday after Treasurer Scott Morrison surprisingly won a three-way battle for the leadership of the Liberal Party, paving the way to become Australia's 30th prime minister.

[SYDNEY] The Australian dollar bounced off lows on Friday after Treasurer Scott Morrison surprisingly won a three-way battle for the leadership of the Liberal Party, paving the way to become Australia's 30th prime minister.

There were three challengers in the leadership battle: former home affairs minister Peter Dutton, Mr Morrison, and former deputy leader and foreign minister Julie Bishop.

Mr Morrison came from the middle to win the ballot although Mr Dutton had been seen as the top contender. Markets were concerned a win for Mr Dutton, an arch-conservative with a hard line stand on immigration, could undermine Australia's economic growth which has been supported by high levels of inward migration.

The Australian dollar jumped a quarter of a US cent when Mr Morrison was announced the victor.

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The Aussie was last up 0.4 per cent at US$0.7276 from a day's low of US$0.7238.

So far it is down 0.6 per cent for the week, after skidding 1.4 per cent overnight amid the political turmoil to become the worst-performing major currency.

"PM Morrison is the most market-friendly option, having successfully negotiated through multiple portfolios such as social security, border security, and more recently presiding over a substantial improvement in the budget balance as Treasurer," said Annette Beacher, Singapore-based chief strategist at TD Securities.

Moody's Investors Service too offered its support, saying the change in the leadership has no implications for the country's coveted AAA credit rating.

Across the Tasman Sea, the New Zealand dollar was a shade firmer at US$0.6639.

The currency had sunk overnight in sympathy with its Australian cousin, falling further away from a two-week peak of US$0.6722 hit on Wednesday.

As a result, the kiwi was poised to end the week close to where it started, despite a burst higher mid-week on strong retail sales data.

New Zealand government bonds were barely changed with yields flat across the curve.

Australian government bond futures slipped, with the three-year bond contract down 1.5 ticks at 97.970. The 10-year contract dipped 1 tick to 97.460.

REUTERS