[SYDNEY] The Australian dollar paused near a 3-1/2-month high against its New Zealand counterpart after six straight sessions of gains led by a recent rally in oil prices and on a subtle divergence in monetary policy stance between the two countries.

The commodity-driven Australian dollar held at US$1.0903 on the kiwi, the highest since early February, and was on track for a sixth consecutive winning week.

"The subtly different central bank stances together with recent relative commodity price movements on the back of oil's lift is keeping the AUD/NZD bid," economists at ANZ said in a note.

The Aussie is closely linked to commodities as the country is a major exporter of iron ore, coal and LNG.

Oil prices have surged to 3-1/2 year highs on strong demand, ongoing supply cuts led by producer cartel Opec and looming US sanctions against major crude exporter Iran.

Central banks in both Australia and New Zealand have signalled a steady policy for a while yet as inflation remains subdued. But the Reserve Bank of New Zealand recently indicated that interest rates could go either way, even down, when the Australian central bank has insisted the next move in rates will be up, albeit not for some time.

Against the US dollar, the Aussie was flat at US$0.7507, staying in a holding pattern since early May. For the week so far, it is down 0.4 per cent.

The New Zealand dollar held at US$0.6886, up 0.2 per cent and well above a recent five-month low of US$0.6851.

For the week, the kiwi is down 1.1 per cent, on track for its fifth straight weekly loss - the worst showing since mid-2015 when it fell for eleven consecutive weeks.

New Zealand government bonds eased, sending yields about three basis points higher across the long-end of the curve.

Australian government bond futures were mixed, with the three-year bond contract flat at 97.710. The 10-year contract off 1 tick at 97.0550.

REUTERS