SYDNEY, Oct 14 (Reuters) – The Australian and New Zealand dollars edged higher on Thursday as a pullback in longer-term Treasury yields undermined their U.S. counterpart, while the Aussie extended its rally on the yen to a three-month peak.

The Aussie was firm at $0.7380, after touching a five-week top at $0.7396, but stalled short of resistance around $0.7408. Support lies at $0.7324 with the next major target the September peak of $0.7477.

The kiwi crept to $0.6973, having gained 0.5% overnight, but faced stiff resistance at $0.6980.

The Aussie was having another solid session on the yen to reach 83.72, a gain of 2% on the week so far and the highest since early July.

The currency easily weathered data showing Australia suffered a drop of 138,000 jobs in September, with markets betting on a quick recovery now that stay-at-home restrictions are being unwound.

“Timelier figures show that job vacancies are rising, and in some cases soaring,” said CommSec Chief Economist Craig James. “There are shortages of staff being identified rather than shortages of jobs, especially in hospitality and tourism.”

“The exit still looks bumpy, but it appears less likely that the legacy of lockdowns will be a weak job market.”

The rapid pace of vaccinations is one reason investors have recently wagered the Reserve Bank of Australia (RBA) will hike interest rates well before its favoured time frame of 2024.

Three-year bond yields have shot up in the last couple of weeks to the highest since March last year at 0.59%.

Futures are almost fully priced for a hike in the 0.1% cash rate by next October, in part reflecting bets the U.S. Federal Reserve will be tightening by then.

The RBA, however, is sticking to its dovish script with Deputy Governor Guy Debelle on Thursday saying Australia was not seeing the sort of wage and inflation pressures evident in the U.S. or the UK.

Taylor Nugent, an economist at NAB, noted the damage done by the lockdowns would likely only delay the pick up in wages the RBA argues is necessary to get inflation back into its target band of 2%-3%.

Core inflation has run below that band for the past five years and figures for the third quarter due next week are expected to show another sub-2% reading.

“If Australian core inflation continues to lag global inflation, market pricing of rate hikes looks overdone,” said Nugent. “NAB sees the RBA on hold until 2024.” (Editing by Christian Schmollinger)

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