WELLINGTON/SYDNEY: The Australian and New Zealand dollars held on to hefty gains against sterling on Thursday after enjoying their biggest one-day rally in six months after the Bank of England surprised markets by signalling it was in no rush to hike rates.
The British central bank caused a ruckus by slashing its forecast for wage growth and saying higher rates hinged largely on an improved outlook for pay.
Sterling was at A$1.7941, having slumped more than 1 percent Wednesday to a two-month low of A$1.7920. Against the New Zealand dollar, it fell to a three-week trough of NZ$1.9653 to be last at NZ$1.9698.
There was less action elsewhere, with the Aussie idling at $0.8296, having peaked at $0.9320 overnight where it met heavy resistance. It has been unable to sustain a break above $0.9300 since last week's shock jump in Australia's unemployment rate.
Also weighing on the Aussie is a weakness in commodities with prices of iron ore, Australia's largest export earner, falling to $93.20 a tonne.
The Aussie has been stuck between 92 and 95 cents since late March, with analysts saying a break would have to come from offshore forces.
"Rates are on hold in Australia. There is a risk to growth in China in the second half of the year and we have very easy monetary conditions globally," said Greg Gibbs, a strategist at Royal Bank of Scotland in Singapore.
Gibbs doesn't see the Aussie exiting its well-defined range any time soon, but highlighted the risk of a move lower as the United States economy improves. Support was found at $0.9205/10.
Against the U.S. dollar, the kiwi was a touch firmer at $0.8462. It briefly hit its highest in nearly a week at $0.8490, after data showed that retail sales rose slightly more than expected in the second quarter.
"It was a pretty strong number, plus the previous figure was revised higher. That was a definite cause for the jump," BNZ currency strategist Raiko Shareef said.
"We're still expecting a rate hike in December ... The tone of recent data has been slightly softer, but we don't think that gives too much reason to take our predicted rate hike off the table."
Investors brushed off separate data showing an ongoing easing in New Zealand manufacturing activity in July.
The kiwi has retreated from a near three-year high of $0.8839 hit last month, dogged by expectations of a slowdown in the pace of New Zealand interest rate rises and a tumble in global dairy prices.
BNZ's Shareef said that resistance was growing around 0.8500, a level the kiwi's has failed to clear in the past week. A break of that level and a rise towards $0.8520-$0.8540 could prompt investors to cut some short positions.
Yields on New Zealand government bonds were down around 3 basis points in line with gains across global debt markets.
Australian government bond futures rose, with the three-year bond contract up 3 ticks at 97.390. The 10-year contract also added 2 ticks to 96.575, having touched a 14-month peak of 96.740 Monday.
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