The Australian and New Zealand dollars were subdued on Friday after a week that saw the Aussie rally as chances for a interest rate cut receded, while the kiwi was set for an eighth week of decline as New Zealand’s central bank began an easing cycle.
The Aussie was steady at $0.7748, not far off a peak of $0.7793 set on Thursday after a surprisingly strong employment report made another interest rate cut unlikely. On the week, it was up 1.6 percent.
In contrast, the New Zealand dollar stood at $0.7016, near a five-year low of $0.6966 reached on Thursday after the Reserve Bank of New Zealand delivered a surprise cut in rates and left the door open to more.
“This absolutely hammered the kiwi,” said Stephen Innes, a senior trader at FX/CFD firm OANDA Australia and Asia Pacific.
Against a currency basket, the kiwi was at 73.19, near a two-year low of 72.97 reached on Thursday.
The kiwi has tumbled about 10 percent since it began an extended slide from $0.7744 in late April and analysts believe it has further to fall.
“As the RBNZ has now embarked on an easing cycle that will promptly deliver at least one more 25 basis point cut, we have nudged lower our end-of-year forecasts for NZD/USD, from $0.7000, to $0.6800,” BNZ analysts said in a note.
Key technical support was seen at $0.6950, a trough hit in August 2010, although a breach of that level would open the door to $0.6869, the 50 percent retracement of the kiwi’s long-term rally between 2009 and 2011.
Against its Aussie peer, the kiwi was on track to post a fall of nearly 2 percent, its second biggest weekly fall this year. The Aussie fetched NZ$1.1035, a world away from April, when it was flirting with parity.
New Zealand government bonds extended gains, pushing shorter-dated yields 4 basis points lower and taking yields on two-year notes to around 3.0 percent, its lowest since October 2013.
Australian government bond futures were also firmer with the 10-year contract up 13 ticks at 96.9850, rebounding from a six-month trough of 96.8225. The three-year contract put on 7 ticks to 97.920.