SYDNEY/WELLINGTON: The Australian and New Zealand dollars held near multi-month highs on Wednesday as risk appetite improved and the market wagered on a dovish outcome from the US Federal Reserve's two-day meeting.
The Aussie scaled a three-month peak of $0.9138 to last trade at $0.9126. Key chart resistance was found at $0.9147, the 200-day moving average.
It was recently buffeted by the crisis in Ukraine and slowing growth in China, Australia's key export market. Yet it has managed to rise more than 2 percent this month, largely on the back of upbeat economic data at home.
"The trend is higher for the Aussie," said David Scutt, a trader at Arab Bank Australia. "Secondly, there are expectations the Fed will be less aggressive with its tapering and domestic data is improving, so all that contributed to a stronger Aussie."
Scutt said a clear break of $0.9147 would target 92 cents, a level that won't please the Reserve Bank of Australia which has favoured a lower currency to support the economy.
For now, markets are focused on the Fed's forward guidance on policy with many expecting the central bank to reassure that interest rate hikes are still a long way off despite the unemployment rate falling faster than expected.
The Antipodeans also rose against their Canadian counterpart after the Bank of Canada Governor made dovish comments overnight suggesting another rate cut could not be ruled out.
The Aussie leapt more than 1 percent to C$1.0173, its highest since May, while the kiwi climbed to a 17-year peak of C$0.9608.
Against the US dollar, the kiwi was firm at $0.8610 as investor attention turned from Crimea to the looming Fed announcement.
The currency, which hit an 11-month high of $0.8641 overnight, was unmoved by a flurry of announcements and data as it settled around its late New York level.
"The kiwi has been quite resilient, it's been a feature of the past few weeks in the face of ebbs and flows of risk on-risk off, it's definitely reacted more to risk on," said Bank of New Zealand strategist Raiko Shareef.
"But from here it's absolutely eyes on the Fed." The kiwi was trading a narrow range, with near-term support around $0.8581. Initial resistance was at the overnight high and then the 2013 high of $0.8676.
The commodity currency was unaffected by a fall in dairy prices and sales volumes at the latest auction by Fonterra, the third consecutive sale where prices have eased.
Shareef said the fall pointed to likely easier dairy prices for the rest of the year, which could generally weigh on the currency. Kiwi also brushed off data showing the annual current account deficit narrowing to its lowest in nearly two years on the back of surging dairy exports.
News that the New Zealand dollar will be directly tradable against the Chinese yuan was seen as a more general positive for the kiwi. Like Australia, China is New Zealand's biggest trading partner.
New Zealand's fourth quarter gross domestic product data is due on Thursday.
A Reuters poll forecasts 0.9 percent growth compared to the previous quarter. New Zealand government bonds were a touch firmer, pushing yields a tick lower along the curve.
Australian government bond futures were a touch softer with the three-year bond contract down half a tick at 96.990. The 10-year contract was off 1 tick to 95.900.
Two-year government bonds yields rose as far as 2.81 percent, a level not seen since November. The Australian yield curve has flattened sharply as the market priced out the chance of further rate cuts, with the spread between 10- and 3-year bonds narrowing to 100 basis points, from 135 in January.
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