The Australian and New Zealand dollars were ending the week on the defensive on Friday as upbeat economic data lifted their U.S. counterpart, while debt markets further lengthened the odds on early rate cuts at home.
The Aussie faded to $0.6596 AUD=D3 , having failed to hold a key $0.6650 chart level. That left it down 1.3% for the week and well away from the recent four-month top of $0.6714. Support now lies in the $0.6560/6580 zone.
The kiwi dollar held at $0.6095 NZD=D3 , having eased 0.6% for the week and off a two-month high of $0.6152. It has support at $0.6084 and $0.6041.
The kiwi has been underpinned by a hawkish shift in outlook from the Reserve Bank of New Zealand (RBNZ) which forced markets to sharply scale back expectations for rate cuts.
0#RBNZWATCH The probability of an October easing has collapsed to just 28%, from 84% early in the week, while a cut in the 5.5% cash rate is now not fully priced in until April next year.
"The Bank did send a rather clear signal that it does not intend to deliver rate cuts this year," said Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities.
"We stick to our call for the first RBNZ cut to be delivered at its May'25 meeting."
The hawkish turn has seen key two-year swap rates NZDSM3NB2Y= surge 22 basis points in just two sessions to reach 5.095%. Yields on 10-year bonds NZ10YT=RR climbed 17 basis points to 4.808%.
That has attracted more carry demand as investors borrow yen at low rates to invest in the higher yielding kiwi, sending it flying to a 17-year peak of 96.11 yen NZDJPY= .
The Aussie has also lost ground to the kiwi, sliding 0.8% for the week and reaching a two-month low of NZ$1.0809 AUDNZD= .
Markets have likewise pushed out the likely timing of policy easing from the Reserve Bank of Australia (RBA), and even have a small chance the next move will be a hike.
0#RBAWATCH Futures imply a limited chance of a cut until April next year, and a quarter-point move is not fully priced until July.
Much will depend on whether domestic inflation proves sticky, underling the importance of the monthly April consumer price report due next week.
Analysts at Goldman Sachs expect a rise of 0.3% for the month, a step down from 0.7% in March. That would see the annual pace slow to its lowest since late 2021 at 3.2%, and closer to the RBA's 2-3% target band.
