By Cecile Lefort
WELLINGTON, Oct 2 (Reuters) - The Australian and New Zealand dollars were a touch firmer on Friday with investors reluctant to take large positions ahead of U.S. jobs data later in the session.
The Australian dollar stood at $0.7037, having peaked to $0.7085 on Thursday. It touched a trough of $0.6934 earlier in the week, largely due to expectations the U.S. Federal Reserve may still raise rates this year.
Investors were awaiting Australian retail sales data before turning their attention to U.S. non-farm payrolls at 1230 GMT for further clues on the timing of the Fed's first hike in nearly a decade.
Economists expect the report to show that employers added 203,000 jobs in September.
With speculators heavily bearish on the Aussie, an upside surprise could set a fire under the U.S. dollar and send the Aussie to a fresh 6-1/2-year trough below $0.6892.
A disappointing outcome, however, could trigger a short squeeze higher in the Aussie. Resistance was found at $0.7066, the 38.2 percent retracement of the September move.
For the week, the Aussie looked little changed, having ended the third quarter 9 percent lower.
Across the Tasman sea, the New Zealand dollar NZD=D4 was steady at $0.6408, from a peak of $0.6450 on Thursday. It has remained remarkably stable in the past month, having traded in a narrow range of $0.6244 to $0.6458.
It shed 5.4 percent in the third quarter when it dropped to a six-year low under 62 cents.
Its outlook was negative with economists expecting the Reserve Bank of New Zealand to cut rates again to stimulate a sluggish economy.
New Zealand government bonds 0#NZTSY= had a soft tone, sending yields one basis points higher on the longer end of the curve.
Australian government bond futures were quiet, with the three-year bond contract YTTc1 up one tick at 98.210. The 10-year contract was half a tick lower at 97.3700.
Australian government bond futures rose, with the three-year bond contract up 2 ticks at 98.220. The 10-year contract YTCc1 added 2.5 ticks to 97.3750.