The Australian dollar entered a lull on Friday after repeatedly failing to break resistance above 78 cents, while the New Zealand dollar nursed heavy losses following dovish-sounding comments from a top central banker. The Australian dollar was firm at $0.7777, within sight of this week's peak of $0.7844. The 78 cents barrier has proved a major obstacle to bulls, who have failed four times this week to reach or sustain a break.
Supporting the Aussie was a dovish turn in the Reserve Bank of New Zealand (RBNZ)'s monetary approach on Thursday which triggered an unwinding of long kiwi/short Aussie positions. "The RBNZ finally opened the door to a rate cut and it makes the Aussie/kiwi parity a lot less likely," said Sean Callow, a strategist at Westpac.
The Aussie leapt to NZ$1.0283, showing gains of 1.5 cents for the week. Against its US counterpart, the Aussie was set to end the week where it started, having already gained 2.2 percent so far in April. The central bank cut rates to a record low of 2.25 percent in February and markets are fully priced for a follow-up move around mid-year. The New Zealand dollar was consolidating around $0.7580 following a dovish comments by a senior RBNZ official.
Near term support for kiwi is at the overnight low of $0.7537 with resistance still at $0.7635. The currency is down 1.3 percent for the week. The RBNZ's dovish turn knocked the kiwi lower on most cross rates, with the trade weighted currency basket falling more than 1.3 percent. NZ markets will be closed for a public holiday on Monday. New Zealand government bonds were flat. Australian government bond futures dipped, with the three-year bond contract off 2 ticks at 98.090. The 10-year contract was also 2 ticks lower at 97.4600.
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