WELLINGTON/SYDNEY: The Australian dollar scaled a 10-month peak on the yen and bounced on the US dollar on Thursday, while bond yields soared to multi-month peaks as investors scaled back long-held positions in safe-haven Treasuries.
The Antipodean currencies notched solid gains on the yen, which has recently become the funding currency of choice for carry trades in place of the US dollar.
The Australian dollar rose as high as 88.02 yen before running into heavy resistance, having flirted twice this month with the psychological barrier of 88.00. A sustained break would target the May high of 88.75. It was last at 87.90.
The kiwi was also well supported versus a broadly weaker Japanese currency, rising 0.5 percent to 68.10 yen. It touched a seven-month high around 68.30 on Wednesday.
The Antipodeans had a harder time against a firm US dollar but did manage to edge up from seven-week lows.
"The US dollar is now consolidating after a big rise in the past few weeks," said Joseph Capurso, a strategist at Commonwealth Bank of Australia.
The Aussie crawled up to $1.0464, from $1.0450 in New York after spending most of the session in the red. It briefly touched $1.0422, its lowest since Jan 20.
The New Zealand dollar nudged up just above $1.8100, from $0.8081 in New York, having dipped as far as $0.8061, its weakest since late January.
Capurso said option barriers at $1.0400 supported the Aussie, while the US dollar faced similar barriers against the euro at $1.3000.
The Antipodeans have still lost more than 1 percent each this week against a broadly stronger US dollar, which rose to 11-month highs against the yen and one-month peak against the euro.
The spike was underpinned by growing optimism on the US economic recovery and subsequent steep rises in US bond yields which rocketed to multi-month highs.
Australian debt futures followed suit, with the scale of the losses amplified by the rolling over of futures contracts from March to June.
The Australian 10-year contract slid 0.20 points to 95.680, having dropped as far as 95.675, its lowest since November. It was testing major support around 95.55/65.
The three-year contract dropped 0.19 points to 96.190, again the lowest since early November.
Resistance for the Aussie is seen between $1.0475 and $1.0505. But with four consecutive sessions of lower highs, technicals indicate a downtrend in place.
Key support is found at $1.0400/05, the 200-day MA and the 38 percent of the Nov/Feb climb. A break would target the 100-day MA of $1.0370.
NEW ZEALAND DOLLAR
The New Zealand dollar slipped against the Aussie , which edged up 0.1 percent to NZ$1.2903. Versus a currency basket, the kiwi fell 0.6 percent to 72.74, its lowest in around a week.
Mixed domestic economic data, including a pick-up in manufacturing activity and an easing in consumer confidence, offered little intraday direction to the currency.
The kiwi has sold off from around $0.8300 last week, after the Reserve Bank of New Zealand warned that a strong currency was weighing on the broader economy and could hold the central bank back from raising interest rates.
Analysts said broad strength in the US dollar, along with concerns about oil supply and a slowdown in the Chinese economy were also keeping the kiwi under selling pressure.
But some argued that a decisive pick up in the New Zealand economy, driven by the rebuilding efforts after last year's earthquake in Christchurch, would put the kiwi back on its broad appreciating trend from the start of the year.
"If we see risks subside on the oil front and on China, combined with the continued improvement in New Zealand data as we get closer to the rebuilding of Christchurch, those are the things we would expect to support the currency," said Hamish Pepper, currency strategist at Barclays Capital in Singapore.
Speculation that New Zealand interest rates, currently at 2.5 percent, will stay higher than many other countries for years to come has been a supportive factor for the kiwi.
Short-term interest rates markets are pricing in one 25 basis point rate rise over the next 12 months.
New Zealand government bond prices followed US Treasuries sharply lower, sending yields at the long end of the curve as much as 14 basis points higher.
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