Australian dollar lifted by RBA hawks, kiwi belly flops

The Australian dollar bounced on Friday after the country's central bank again sounded hawkish on inflation and interest rates, while its New Zealand counterpart seemed set for a fourth straight week of losses.

Appearing before lawmakers, Reserve Bank of Australia Governor Michele Bullock emphasised that upside risks to inflation were materialising and the board was considering whether policy was tight enough to cope.

"Governor Bullock leaned clearly hawkish," said Andrew Boak, an economist at Goldman Sachs. Boak expects the RBA to hike its cash rate by 25 bps to 4.60% later this month and keep it there until the second half of next year, while acknowledging that "a follow-up hike in November remains a material risk."

Investors reacted by nudging up the chance of a September hike to 95%, with a further move to 4.85% almost fully priced by February.

The Aussie edged up 0.2% to $0.7126 AUD=D3, having bounced almost 0.4% overnight, away from support at $0.7075. It was still down 0.6% for the week and faced resistance around $0.7140 and $0.7187.

The Australian dollar was also aided by a 1% jump in the yen to 111.78 AUDJPY= after the Bank of Japan raised its rates but sounded less hawkish than speculators had hoped for.

The kiwi dollar had less luck, easing another 0.2% to $0.5717 NZD=D3, bringing losses for the week to 1.6%. Support lies at a 10-week trough of $0.5705, with resistance at $0.5762.

The Aussie made the most of the kiwi's troubles, climbing 1% on the week to NZ$1.2446 AUDNZD=R, highs not seen since early 2013.

The kiwi dollar has been on the slide since the Reserve Bank of New Zealand lifted rates to 2.75% earlier this month but projected a slower and more limited tightening cycle than markets had wagered on.