SYDNEY/WELLINGTON: The Australian and New Zealand dollars were firm and within sight of recent highs on Friday, taking comfort from data showing a big rise in Chinese imports. China, Australia's biggest trade partner and New Zealand's second largest, had higher-than-expected imports for August, supporting the two commodity-linked currencies. The Australian dollar settled around $0.9225, having held a fairly tight range in quiet local trading. It had hit a four-month peak of $0.9278 overnight. "We started the week where risk was off the table and we're finishing where it's back on again, but we're in choppy markets where it could come off again," said Derek Rankin of Rankin Treasury Advisory. The Aussie was capped by some late week US dollar strength, and is fractionally higher for the week against the greenback but continued its strong run against the euro, which sank to a low of A$1.3711 for a loss of 2.5 per cent so far this week. The Aussie has also drawn solid support and gained over other currencies from its yield advantage, after strong jobs figures have seen the market sharply revise up the risk of further rate hikes. Interbank futures now show a 60 per cent chance of a hike to 4.75 per cent by Christmas. A couple of weeks ago, that was pricing in a chance of a rate cut. Australian three-year bond futures were down 0.030 points at 95.35, while 10-year futures fell 0.040 points to 95.035. KIWI WATCHES The kiwi, which has been a spectator to broader market moves through much of the week, was steady at $0.7246. It hit $0.7287 offshore, the highest in more than four weeks. It tracked the stronger Aussie higher against the euro, holding around 0.5712 euro, a shade below a 10-week high of 0.5719 euro. It is also firm at 60.80 yen. Attention for next week will be on at Thursday's Reserve Bank of NZ monetary statement, which is expected to see the central bank call a pause in its rate tightening after just two rises because of soft local activity and outlook. Market pricing implies only an 8 per cent chance of a hike on Sept 16 slips from 10 per cent on Thursday and 20 per cent last week. Analysts polled by Reuters expect no rise. Data showing New Zealand's solid terms of trade but below expectations in the second quarter had no impact, but was seen confirming that the recovery may be more subdued than expected. "The data suggest strong downside risk to the RBNZ's growth forecasts made in June. This reinforces the view that the RBNZ will keep the cash rate unchanged for the rest of the year," said ASB economist Jane Turner. Aussie/kiwi pair was lower at NZ$1.2716 from a one-week high of NZ$1.2784 overnight, with the pair supported by weak NZ fundamentals and no prospect of a rate hike next week. NZ bonds were mixed, being softer in the short end but with a slight bid tone at the long end of the curve.

Source