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NZ dollar lags on weak inflation, Aussie pulls back in holiday trade

Kitco News

By Charlotte Greenfield

WELLINGTON, Jan 26 (Reuters) - The New Zealand dollar slipped on Friday, weighed by weak inflation and views the central bank was in no rush to tighten policy, while its Australian counterpart consolidated below four-month highs during a quiet holiday trading period.

The kiwi dollar edged down 0.1 percent to $0.7318, despite a weaker greenback, as investors took a gloomy view of the country's tepid fourth quarter inflation.

The surprisingly weak consumer price index (CPI) data released on Thursday had knocked the currency off its four-month high of $0.7435. Still, the kiwi was poised to post a modest rise of 0.2 percent for the week, its seventh straight week of gains.

"Broad U.S. dollar weakness will limit New Zealand dollar downside, though the currency will spend a few days nursing losses after the lower than expected Q4 CPI," Westpac strategists said in a research note.

The U.S. dollar had suffered heavily after the United States' top Treasury official this week said a weaker greenback was good for the country, giving a green light to speculative sellers.

That had helped the Aussie break through resistance of around $0.8030 on Thursday, rising as high as $0.8119 overnight. But the currency had pulled back and returned to trade around $0.7305 during quiet trade with markets mostly closed for the Australia Day public holiday.

The currency was set for a 0.4 percent rise on the week.

Australian government bond futures eased, with the three-year bond contract up 0.5 ticks at 97.75 and the 10-year contract rising 0.2 ticks to 97.17.

New Zealand government bonds gained, sending yields one basis points lower along most of the curve.

(Reporting by Charlotte Greenfield; Editing by Sam Holmes)

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