Aussie, NZ dollar lifted by hopes of Italy bailout

WELLINGTON/SYDNEY: The Australian and New Zealand dollars gained more than one percent on Monday on talk of a bulky International Monetary Fund rescue package for Italy, which lifted risk appetite across the board.

The Aussie dollar up more than a full cent to $0.9850, from $0.9712 in New York. It jumped to a four-day high of $0.9868, helped by wave of stops triggered above $0.9800.

The break above Friday's $0.9773 high ends a 9-day sequence of lower daily highs and lower lows, suggesting the slide may be waning, according to a trader. Strong resistance at $0.9907, with initial support at $0.9620/25.

Aussie has lost nearly 7 pct this month, knocked by risk aversion stemming from the euro zone debt crisis.

The kiwi dollar leaps to one-week highs at $0.7533, from its New York close at $0.7400 on Friday. Initial support level at $0.7440, with resistance around $0.7575.

An unsourced Italian media report said the IMF was preparing an aid package of up to 600 billion euros to give Italy breathing space for 18 months. However, markets are sceptical about the size of the aid as such a sum would be beyond its current capacity.

Still, news of potential IMF help was enough to trigger a strong Asian risk rally with Korean, Japanese, Australian shares up more than 1.5 pct. S&P futures gain more than 2 pct.

Antipodeans jump to one-week peaks against safe-haven yen, with Aussie at 76.49 yen, off a seven-week low of 74.72 hit last week. Kiwi leaps to 58.39 yen, off a seven-month trough just below 54 yen.

Kiwi not moved after a National Bank's survey shows business confidence rise for the first time in four months in November and firms were also more optimistic about their own prospects going into next year.

Markets still price in a 16 pct chance of a rate cut next month and 16 bps over the next yr because of euro zone woes.

Earlier, markets unmoved by the result of the NZ general election, which sees as expected Prime Minister John Key's National return to power. It should see it able to push through its policy platform of budget balancing, assets sales and welfare reform.

This week sees the release of Australia's business investments, manufacturing, building and retail sales data, while NZ has terms of trade and building.

NZ government bonds fall with long dated yields 8.5 basis points higher.

Aussie debt futures also under pressure with the three-year contract down 0.10 points at 96.880, and the 10-year contract dipping 0.085 points to 96.030.