SYDNEY/WELLINGTON: The Australian and New Zealand dollars nursed deep losses on Thursday after the Federal Reserve showed enough confidence in the US economy to stay on track to raise interest rates next year, giving the US dollar a fillip.
The kiwi slipped to a one-week low of $0.7690 in volatile trade, brushing off domestic data showing stronger-than-expected quarterly economic growth.
"The data doesn't change our forecast for the first Reserve Bank of New Zealand (RBNZ) rate hike to come in December 2015, that's a long time away," said Tim Kelleher, head of institutional FX sales at ASB bank. "And in the meantime you're going to see Fed rate hikes as early as April theoretically, so the bullish US dollar trend will continue."
Closing out a two-day meeting, the US central bank said it would take a "patient" approach towards raising rates.
Kelleher added that the kiwi would suffer more if falling global commodity prices continued to shake confidence.
The kiwi was last at $0.7700.
Support was found at $0.7609, a 2-1/2-year low hit earlier this month.
A further rise in the currency's volatility, which hit a 15-month high earlier this week, may trigger such a move.
The Australian dollar sank to a 4-1/2-year low of $0.8107, having shed more than 1 percent during a whippy session on Thursday.
It was last at $0.8123 and was seen vulnerable.
Major support was found at the mid-2010 low at $0.8066 and a break under could open a retracement all the way to 60 cents touched in 2008 during the peak of the global financial crisis.
The Aussie has tumbled 9 percent this year, an outcome that will please the Reserve Bank of Australia which has called for a lower currency to support a slowing economy.
In the bond markets, Australian government futures retreated from two-year highs.
The three-year bond contract shed 7 ticks to 97.760, while the 10-year contract fell 11 ticks to 97.0950 in a bearish steepening of the curve.
New Zealand government bonds also eased, pushing yields as much as 5 basis points higher across the curve.
The 10-year bond dropped as far as 3.6 percent, its weakest since mid-last year.
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