WELLINGTON/SYDNEY - The New Zealand dollar languished near a five-year low against the greenback on Friday, seemingingly destined for its ninth week of declines as expectations mount for further cuts in interest rates.
In contrast, its Australian peer climbed for a second week to probe one-month highs on a defensive US dollar, which was dealt a blow by a dovish-sounding Federal Reserve and tame US inflation data.
The kiwi was flat at $0.6926 on Friday, just above a five-year trough of $0.6880 and down 0.9 percent so far this week. Since beginning an extended slide from $0.7744 back in May, the kiwi has slumped more than 10 percent.
Given the sheer size of its fall, the kiwi may find a toehold in the short term. "Holding a short NZD/USD position is not cheap, and we imagine leveraged investors will grow frustrated once downside momentum weakens," said BNZ strategist Raiko Shareef in a note.
Going into the weekend, support is seen at $0.6880, with sellers emerging at $0.6980.
However, the kiwi's downtrend should remain intact with the Reserve Bank of New Zealand now seen almost certain to follow up last week's rate cut at its July 23 policy review. Several analysts are also picking a third cut before the end of the year.
New Zealand bond yields were lower across the curve with the long-end down as much as 4 basis points.
The kiwi suffered a fourth week of losses against its Australian peer, which jumped to its the highest in over seven months at NZ$1.1285.
The Aussie is now flirting with solid resistance around NZ$1.1300, an area that capped it repeatedly late last year.
On the greenback, the Aussie rose to a near one-month high of $0.7849 overnight, before stepping back to $0.7793. Still, it was up 0.9 percent this week. "It ran straight into resistance at the key 0.7850 level, which has performed this role several times this year," said Stuart McPhee, senior technical analyst at OANDA. "The currency's recent resilience remains a thorn in the side of the Reserve Bank who continue to express their desire for a lower currency." Australian three-year government bond futures edged up 4 ticks to 98.110, while the 10-year contract slipped 1.5 ticks to 97.0950. The outcome was a steeper yield curve, mirroring a similar move in US Treasuries.