SYDNEY (Reuters) - The Australian and New Zealand dollars fell from multi-week highs against their U.S. counterpart on Friday after the Federal Reserve underlined the diverging monetary policies between the United States and the antipodean countries.
The Australian dollar <AUD=D4> was last at $0.7246, easing from as high as $0.7303 touched on Thursday - a level not seen since late September.
During the week so far, the Aussie has risen 0.7 percent for its second consecutive weekly gain after upbeat economic data from China, Australia's No.1 trading partner..
The New Zealand dollar <NZD=D4> slipped to $0.6747 from a three-month top of $0.6820 after investors pared the risk of a rate cut following strong labour data on Thursday.
The kiwi is still up 1.5 percent for the week so far, building on a near 2 percent gain the previous week.
Yet the rally in the two currencies was stopped by a resurgent dollar after the Fed signalled it was sticking to its tightening path with a more than 75 percent chance of a December rate hike priced in by the market. <FEDWATCH>
On the flip side, the Reserve Bank of Australia (RBA) has signalled it will keep rates on hold at a record low 1.50 percent for a long time to come.
Its New Zealand counterpart too has emphasised the need for rates to stay there until 2020. It has kept the official cash rate at 1.75 percent since November 2016.
On Friday, the RBA upgraded its growth forecasts for the next couple of years and also sounded upbeat about the labour market. However, it still does not see a "strong case" for a near-term rate rise as inflation is expected to remain tepid.
The RBA statement "just reinforced the fact that a lot of things still have to happen...before the RBA would even think about acting on its tightening bias," said Ray Attrill, Sydney-based head of forex strategy, at the National Australia Bank.
"U.S. interest rate volatility is going to be an important driver between Australian and U.S. interest rates for the time being."
Australian markets are also looking to the release of the all-important unemployment and quarterly wage figures due next week.
The RBA is awaiting a pick up in wage growth in the hope that it will help boost consumer spending and lift inflation to within its target band.
New Zealand government bonds <0#NZTSY=> fell sending yields about 2.5-3 basis points higher across the curve.
Australian government bond futures fell, with the three-year bond contract <YTTc1> and the 10-year contract <YTCc1> each down 1 tick at 97.805 and 97.220 respectively.
