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Australian dollar set for best weekly show in 2 months, NZ falls

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The Australian dollar paused on Friday after a four-day rally but is set for its best weekly performance in two months.

[SYDNEY] The Australian dollar paused on Friday after a four-day rally but is set for its best weekly performance in two months.

The Australian dollar held at US$0.7636, coming off an over two-week high hit on Thursday when it rose 0.3 per cent.

The Aussie got a boost after the Reserve Bank of Australia (RBA) governor gave an upbeat assessment of the economy on Thursday while adding it was "not particularly useful" to continue cutting rates, after already easing twice this year.

The Aussie was also aided this week by the Bank of Japan's recommitment to help lift its economy out of decades-long stagnation and the Fed staying pat on interest rates.

"The Aussie has done a lot better in 2016 than many expected," wrote Greg McKenna, chief market strategist at AxiTrader.

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The currency is up nearly 5 per cent this year, thanks in large part to carry trade where investors borrow in safe havens such as the yen or the euro to invest in risky, high-yielding assets.

Traders were still eyeing 77 US cents as the next stop for the Aussie. It has breached that barrier several times in the last few months but fell back each time.

"At current levels we are at an important technical juncture," said Matt Simpson, senior analyst at ThinkMarkets. "The rally has paused just below a key chart trendline which would be a phenomenal level for bulls to overcome."

The Aussie also outpaced the New Zealand dollar on Friday, rising for the seventh straight day to hit a one-month high of NZ$1.0486. The cross is, however, down about 1.5 per cent this year.

The New Zealand dollar fell 0.3 per cent to US$0.7291, continuing to drift lower after the central bank left rates on hold at 2.0 per cent on Thursday but signalled further easing.

It is set to end the week flat but is up 6.6 per cent so far this year.

"The uptrend remains in place against the USD for now," said OM Financial Limited private client manager Stuart Ive.

"Only a close below US$0.7270 opens the downside from a daily chart perspective," Mr Ive added.

He tipped initial near-term resistance at 0.7345.

New Zealand government bonds gained, sending yields 1 basis point lower at the short end and half a basis point lower at the long end.

Australian government bond futures were mixed, with the three-year bond contract down 1 tick at 98.43. The 10-year contract rose 3 ticks to 97.9850.


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