By Cecile Lefort
SYDNEY/WELLINGTON, May 3 (Reuters) - The New Zealand dollar rose on Wednesday after a strong jobs report reinforced a steady interest rate outlook for the months ahead, while the Australian dollar drifted lower.
The New Zealand dollar NZD=D4 edged up to $0.6950, from $0.6937 early, pulling further away from a 10-month trough of $0.6847 touched last week.
It powered up to a peak of $0.6969 before investors booked profits. It is up 1.2 percent so far this week and a break above solid resistance at $0.6970 would test April's summit of $0.7011.
It also climbed to a one-month high versus the yen NZDJPY=R and leapt to its highest since early March against its Canadian counterpart NZDCAD=R .
Debt futures imply a slightly higher chance of an interest rate hike, albeit not for some time. Dealers said markets are pricing a 20 basis points-tightening by February, from 18 basis points before the data but still short of a full 25 basis point increase. some economists remained on the cautious side.
"Even though unemployment has declined a fair bit, there is still no sign of wage inflation yet," said Michael Turner, a strategist at RBC Capital Markets in Sydney.
"We remain comfortable suggesting that the Reserve Bank will be on hold for the foreseeable future."
The Reserve Bank of New Zealand (RBNZ) holds its policy review next week and is expected to keep rates at a record low of 1.75 percent.
Also supporting the kiwi was a rise in global dairy prices at auction, the fourth international auction in a row at which prices has risen. Dairy products are New Zealand's top export earner. the Tasman sea, the Australian dollar AUD=D4 reversed earlier gains to $0.7523, from a peak of $0.7546, on falling iron ore prices. Iron ore is Australia's top export earner.
Dealers said the Aussie was consolidating, having bounced from a low of $0.7452 touched earlier this week.
The Aussie gained on Tuesday after the Reserve Bank of Australia (RBA) kept rates unchanged at a record low of 1.5 percent at its policy meeting and sounded a touch more upbeat about global growth, reinforcing expectations of a steady rate outlook.
Selling in the yen and Canadian dollar is expected to provide some support for the Aussie, which popped to C$1.0346 AUDCAD=R , its highest since November.
Australian government bond futures rose, with the three-year bond contract YTTc1 up 1 tick to 98.150. The 10-year contract YTCc1 edged up 1.5 tick to 97.3800, while the 20-year contract YXXc1 unchanged at 97.7850.
New Zealand government bonds 0#NZTSY= gained, sending yields as much as 3.5 basis points higher along the curve. (Editing by Sam Holmes)