SYDNEY, Feb 23 (Reuters) - The Australian dollar was aiming for a third straight week of gains on Friday as it benefits from carry demand against the yen, while the New Zealand dollar weathered a dire report on retail sales that raised the risk of recession.

The Aussie was up 0.4% for the week so far at $0.6562 , having topped out at $0.6595 overnight. That put it comfortably above a recent three-month trough of $0.6443, with the next target being major resistance around $0.6625.

The kiwi dollar held at $0.6198, having risen for seven straight sessions to as high as $0.6218. It was up 1.1% for the week, with the next chart barrier around $0.6242.

Both were buoyed by carry trades as investors borrowed yen at zero rates to buy higher yielding currencies. The Aussie hit a nine-year peak of 99.02 yen, having climbed for three weeks in a row to breach resistance at 98.60.

The kiwi had climbed 1.3% on the week to another nine-year top of 93.36 yen and was fast approaching a 2015 peak of 94.05 yen.

The kiwi has got an extra lift from speculation the Reserve Bank of New Zealand (RBNZ) might hike its 5.5% cash rate at a policy meeting next week.

Markets are pricing in a one-in-three chance of a rise on Feb. 28, and a 60% chance of a move in May. Analysts polled by Reuters showed the vast majority expected no more hikes, with a first easing possible in August.

Domestic data on retail sales out on Friday showed borrowing costs were already biting hard, causing a startlingly steep 1.9% dive in volumes for the December quarter.

The slump means there is a real risk the economy shrank again in the quarter, putting it back into recession.

"We see a 25bp tightening as just a 25% probability," said Kelly Eckhold, head of NZ economics at Westpac. "We think the RBNZ's objective will be to try to maintain the recent repricing in financial markets which has removed the expectation of rate cuts until at least the end of this year."

"The RBNZ will also leave open the option to tighten at the May Monetary Policy Statement, should the data warrant."

Markets see no chance the Reserve Bank of Australia (RBA) will lift its 4.35% cash rate any further, but neither are they wagering on an early easing.

Futures imply around a 70% chance of a first cut in August, with only 35 basis points of easing priced in for the entire year. (Reporting by Wayne Cole Editing by Shri Navaratnam)