By Swati Pandey and Rebecca Howard
SYDNEY/WELLINGTON, Sept 23 (Reuters) - The Australian dollar paused on Friday after a four-day rally but is set for its best weekly performance in two months.
The Australian dollar AUD=D4 held at $0.7636, coming off an over two-week high hit on Thursday when it rose 0.3 percent.
The Aussie got a boost after the Reserve Bank of Australia (RBA) governor gave an upbeat assessment of the economy on Thursday while adding it was "not particularly useful" to continue cutting rates, after already easing twice this year. Aussie was also aided this week by the Bank of Japan's recommitment to help lift its economy out of decades-long stagnation and the Fed staying pat on interest rates.
"The Aussie has done a lot better in 2016 than many expected," wrote Greg McKenna, chief market strategist at AxiTrader.
The currency is up nearly 5 percent this year, thanks in large part to carry trade where investors borrow in safe havens such as the yen or the euro to invest in risky, high-yielding assets.
Traders were still eyeing 77 U.S. cents as the next stop for the Aussie. It has breached that barrier several times in the last few months but fell back each time.
"At current levels we are at an important technical juncture," said Matt Simpson, senior analyst at ThinkMarkets. "The rally has paused just below a key chart trendline which would be a phenomenal level for bulls to overcome."
The Aussie also outpaced the New Zealand dollar AUDNZD=R on Friday, rising for the seventh straight day to hit a one-month high of NZ$1.0486. The cross is, however, down about 1.5 percent this year.
The New Zealand dollar NZD=D4 fell 0.3 percent to $0.7291, continuing to drift lower after the central bank left rates on hold at 2.0 percent on Thursday but signalled further easing.
It is set to end the week flat but is up 6.6 percent so far this year.
"The uptrend remains in place against the USD for now," said OM Financial Limited Private Client Manager Stuart Ive. "Only a close below $0.7270 opens the downside from a daily chart perspective," Ive added.
He tipped initial near-term resistance at 0.7345.
New Zealand government bonds 0#NZTSY= gained, sending yields 1 basis point lower at the short end and half a basis point lower at the long end.
Australian government bond futures were mixed, with the three-year bond contract YTTc1 down 1 tick at 98.43. The 10-year contract YTCc1 rose 3 ticks to 97.9850. (Editing by Simon Cameron-Moore)