The Australian dollar eased on Friday, continuing to pull back from a two-month peak set earlier in the week as investors reassessed their positions ahead of a speech by Federal Reserve Chair Janet Yellen. The Australian dollar last traded at $0.7795, down 0.4 percent on the day.
"Aussie traders continue to be on guard for verbal intervention from the Reserve Bank of Australia (RBA), which in theory should be a limiting factor for the Aussie dollar gains and probably explains the wall of resistance at $0.7900 level," said Stephen Innes, senior trader at OANDA Asia Pacific.
The Aussie has recently benefited from a squeeze in short positions that swept it off a six-year trough of $0.7561. This was partly due to a turn in bullish US dollar sentiment after the Federal Reserve gave a dovish spin last week.
The New Zealand dollar was a touch lower at $0.7571, with traders seeking fresh cues after an overnight session that saw the currency test support and resistance levels. The kiwi reached an offshore high of $0.7664, before stronger US data knocked it back to a low of $0.7557.
"Further failed topside attempts for the NZD could spell the last of (the) exhaustive energy spent trying to move through resistance at 77 US cents," ANZ analysts said in a note.
In the near term, the kiwi has a solid base at $0.7550, but a concerted breach of that could open the way to a low of $0.7450. Initial resistance is seen at the 100-day moving average around $0.7620/30.
New Zealand government bonds were softer, sending yields 3.5 basis points higher along the curve. Australian government bond futures followed a negative lead from US Treasuries. The three-year bond contract eased 5 ticks to 98.260, pulling further away from an all-time peak of 98.330. The 10-year contract slid 8.5 ticks to 97.5900.
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