By Cecile Lefort and Rebecca Howard
SYDNEY/WELLINGTON, Aug 5 (Reuters) - The Australian dollar rose near recent peaks against its U.S. counterpart and the pound on Friday, as investors brushed aside a dovish economic outlook by the country's central bank.
The Australian dollar AUD=D4 popped to $0.7654, from $0.7630 early and was flirting with its highest level in three months. Resistance was found at $0.7663.
It was on track to end the week 0.7 percent higher despite the Reserve Bank of Australia (RBA) lowering its policy rate to a record low 1.5 percent on Tuesday.
Even a very subdued outlook for inflation released by the RBA on Friday failed to inspire selling, forcing bears to once again cover short positions. cuts clearly remain possible," said Craig James, chief economist at CommSec after the RBA released its quarterly assessment of the economy.
Interbank futures 0#YIB: are pricing in a 50-50 chance of another cut by Christmas.
Although the RBA may be trimming rates, other central banks are going a lot further. The Bank of England (BoE) on Thursday added more stimulus to a world banking system already awash with cash, further weakening the pound.
Sterling slipped GBPAUD= to A$1.7153, having dropped 2 percent on Thursday. A break under A$1.7032 would take it to its lowest since 2013.
Yields on British debt also dived, adding to the appeal of Australia's triple-A government bonds with yields well above those available from its rich world peers.
Ten-year Australian bond paper AU10YT=RR pays 1.89 percent against 1.49 percent in the United States, 0.63 percent in the UK and -0.09 percent in Germany.
Australian government bond futures rose at the long end, with the 10-year contract YTCc1 up 5.5 ticks at 98.0950, while the 20-year contract YXXc1 increased 7.5 ticks to 97.5650.
The three-year bond contract YTTc1 was stuck at 98.600 as the yield curve flattened.
The New Zealand dollar NZD=D4 firmed to $0.7196 as investors took a breath before U.S payrolls data due out later in the session and a policy decision by the Reserve Bank of New Zealand next week.
The kiwi also performed well against the pound NZDGBP=R , soaring 1.84 percent to 0.5467 pounds after the BoE cut rates. The move was the largest daily rise since the Brexit vote on June 23.
New Zealand government bonds 0#NZTSY= gained, sending yields 1 basis point lower at the long end of the curve. (Editing by Simon Cameron-Moore)