By Swati Pandey
SYDNEY, Oct 16 (Reuters) - The Australian dollar was on Friday set for its worst weekly performance since late September as traders wager the country's central bank would ease monetary policy next month while New Zealand's currency also weakened.
The Australian dollar AUD=D4 was last down 0.2% at $0.7083. It fell nearly 1% on Thursday to a three-week low of $0.7056 following a speech by Reserve Bank of Australia (RBA) Governor Philip Lowe who signalled a further easing was imminent. the week, the Aussie is down 2.2%, the biggest drop since late September.
The speech "was, quite simply, a game changer from the perspective of future policy," said Westpac economist Bill Evans who is forecasting a 15-basis-point cut to the cash rate to 0.1% at the RBA's Nov. 3 board meeting.
"The conclusion...is that we can expect policy to remain stimulatory for even longer."
Evans and other economists at Australia's major banks also see the possibility of the RBA expanding its quantitative easing programme to include long-duration government bonds.
As a result, bonds rallied again on Friday with yields on the 10-year paper AU10YT=RR at a 6-1/2-month high.
Ten-year bond futures YTCc1 rose too and were last up 2 ticks at 99.255.
Across the Tasman Sea, the New Zealand dollar NZD=D4 was flat at 0.6595, having been stuck in a small range ahead of a general election on Saturday where Prime Minister Jacinda Ardern is widely expected to win.
Opinion polls have indicated Ardern's centre-left Labour Party has a comfortable two-digit lead over the main opposition centre-right National Party. If Labour wins outright, it will be the first party to govern alone since New Zealand switched to the mixed-member proportional system in 1996. New Zealand has controlled the COVID-19 pandemic, borders are still shut, its key tourism sector is bleeding, and economists are predicting a lasting recession.
The country's central bank is also actively considering negative interest rates to support jobs and growth and to tame its currency. Zealand government bonds 0#NZTSY= were mixed with short-term yields down about 2 basis points and long-ended yields barely changed. (Editing by Sam Holmes)