SYDNEY/WELLINGTON: The Australian and New Zealand dollars held close to multi-month highs against the greenback and the yen on Thursday in the wake of surprisingly aggressive stimulus steps by the Federal Reserve, and on expectations that Japan will follow soon.
The Aussie was firm at $1.0548, having climbed to a three-month high of $1.0585 in early trade. It briefly pierced key barriers at $1.0560, which prompted a wave of short-covering coupled with fresh long positions.
Traders cited large sell orders from managed funds between $1.0590-$1.0610 with major resistance seen at $1.0625, the high on Sept 14 and March 20.
"The Aussie remains very well bid with demand from corporate (accounts) and real money funds and it's going to be very hard going into year-end to be selling the Aussie given the negative carry," said a dealer at a European Bank.
Risk assets received a big lift after the Fed took the unprecedented step of pledging to keep rates near zero until the jobless rate falls to 6.5 percent, a long way from the current 7.7 percent.
Also helping was a jump in prices for iron-ore, Australia's top export earner, which hit a five-month peak at $125 a tonne.
Likewise, the New Zealand dollar was on the front foot having made a nine-month high of $0.8453 overnight, with analysts seeing more gains into the holiday season.
"The February highs are now firmly within reach and are likely to be exceeded before the year end," said ANZ analysts in a market note.
The kiwi, which was anchored at $0.8440, was supported in the near term around $0.8400 with the overnight high the first hurdle ahead of the year's top at $0.8471.
The Antipodean currencies scored large gains against a depressed yen as pressure grows on the Bank of Japan to take bold action next week at its policy meeting to stimulate a struggling economy.
The Aussie dollar climbed to a nine-month high of 88.05 yen to last trade at 87.97. Major resistance was found at the year peak of 88.62, ahead of a 20-month high of 90 yen.
The kiwi did even better, surging 0.5 percent to a four-year high of 70.62 yen, last fetching 70.53, close to its 10-year daily average.
A flurry of New Zealand data showed lower food inflation, sluggishness in the manufacturing and jobs sectors and still wary consumer sentiment, but did not change expectations the economy will still do better than most.
That was reflected in market pricing on interest rates, which for the first time in months, implied no central bank rate cuts over the coming year.
Broad kiwi strength saw the Aussie trailing, slipping to NZ$1.2489, a two-month low, with a test of the 2012 low of $1.2370 seen in October firmly on the cards.
Australian government bond futures fell, with the three-year bond contract off 0.070 points to 97.250 and the 10-year contract 0.085 points down to 96.775.
New Zealand government bonds reclaimed much of their early weakness, with yields closing up to 1.5 basis points higher.
Center>Copyright Reuters, 2012