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The Australian and New Zealand dollars edged lower on Friday as softer U.S. economic data weighed on some commodity prices, though both were still holding hefty gains for the week amid hopes for global policy easing.
The Aussie eased a fraction to $0.6464, and further away from a three-month top of $0.6542. That left it 1.6% firmer for the week so far, with chart support now at $0.6450.
The kiwi dollar faded to $0.5953, having been as high as $0.6055 earlier in the week. It was up 1.1% for the week and has support under $0.5950.
A batch of underwhelming U.S. data took the shine off risk sentiment and put pressure on commodities, with oil the notable loser. However, iron ore held near seven-month highs above $130 a tonne and the mineral is Australia's biggest export earner.
The Aussie took some comfort in another drop in Treasury yields as markets priced in almost 100 basis points (bps) of rate cuts from the Federal Reserve in 2024.
That outlook had also led investors to pare back the risk of another rate rise from the Reserve Bank of Australia (RBA), with futures implying just a 4% chance of a move in December.
The market is now pricing in a 70% chance the RBA is done tightening altogether this cycle, and that despite firm data on wages and jobs out this week.
Yet it also only implies 14 bps of easing for late next year, far short of Fed expectations.
"If U.S. bond yields and Fed policy have peaked, so too has the USD, barring a major global 'risk-off' episode, say from broadening Middle East conflict," said Ray Attrill, head of FX strategy at NAB. "AUD and NZD are accordingly seen to have hit their lows."
He sees the Aussie around $0.6600 by the end of this year and $0.7000 by the middle of 2024, with the kiwi at $0.6000 and $0.6400, respectively.
Over in New Zealand, markets are pricing in almost no chance of another hike in rates and around 45 bps of easing for 2024, starting from May onwards.
The next major hurdle for the Aussie will be minutes of the RBA's November policy meeting out on Tuesday and two appearances by RBA Governor Michele Bullock on Tuesday and Wednesday. (Reporting by Wayne Cole; Editing by Kim Coghill)