SYDNEY/WELLINGTON, May 20:The Australian and New Zealand dollars were off lows on Friday, but still poised for another sorry week after markets ramped up speculation that U.S. interest rates could rise as early as June. The Australian dollar steadied around $0.7237, having briefly dipped on Thursday below 72 cents for the first time since early March. The Aussie has fallen 0.5 percent this week and if sustained, it would be the fifth consecutive weekly loss. It has tumbled six cents in one month, largely on speculation the U.S. Federal Reserve will raise rates, in contrast to the Reserve Bank of Australia which is seen cutting rates to a record low of 1.5 percent later this year. Greg Gibbs, the founder of U.S.-based advisory company Amplifying Global FX Capital, is bearish the Aussie dollar. “Considering our views on the risks coming from the (Australian) housing market and Chinese economic and financial uncertainty, and the close-fought (Australian) election that generates a significant chance of a change of government, we continue to see down side risks for the AUD,” he said. The pound was a star performer after a robust UK retail sales report diminished chances of an interest rate cut that some investors were factoring in. Sterling flew to a three-month peak of A$2.0350 to show a weekly gain of more than 2 percent. It was last at A$2.0159. Sterling reached NZ$2.1749, a level not seen since mid-February, before edging down to NZ$2.1550. It was on track for a weekly increase of 1.7 percent. Against the U.S. dollar, the kiwi regained some ground at $0.6765, from $0.6749 early and an 8-week low of $0.6710 touched on Thursday. “After yesterday morning’s post-US FOMC plunge the NZD/USD has traded a fairly tight range between 0.6720 and 0.6760,” BNZ Senior Market Strategist Kymberly Martin in a research note. It was on track for a weekly loss of 0.1 percent. Data on Friday morning showing strong migration and tourism numbers, also helped support the Kiwi. New Zealand government bonds were mostly steady. Australian government bond futures bounced from lows, with the three-year bond contract up 2 ticks at 98.400. The 10-year contract rose 5 ticks to 97.7050 in a bullish flattening of the curve. The 20-year contract added 5 ticks to 97.0650. The premium between Australian and U.S. two-year cash bond yields dropped to its lowest in 15 years to 71 basis points on Thursday, before edging up to 74 basis points. The gap was 130 basis points mid-April. (AGENCIES)
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