SYDNEY/WELLINGTON: The Australian dollar dived to a three-year low on Thursday as commodity-linked and emerging currencies were hammered by a broadly stronger greenback after the US Federal Reserve said it could slow the pace of bond purchases later this year.* Aussie slumps As much as 2.2 percent to $0.9260, cracking the previous low at $0.9325 and hitting its weakest since September 2010. Last at $0.9293. Next support around $0.9210, but risk is for a move toward $0.9000.
* US dollar surges broadly while commodity currencies, bonds and stocks all dumped after the Fed said it would taper its asset purchases later this year if the economy improves as expected.
* While Fed chairman Bernanke emphasises that tapering was not a tightening and a move in Fed funds was still distant, the market saw it as just the start of a long tightening cycle and brought forward the likely timing of the first rate hike.
* The prospect of an end to free money in the US has sparked a huge unwinding of carry trades with investors rushing to pull money out of emerging markets, which had been very popular due to their higher yields.
* The Aussie is used by many as a proxy for the less liquid emerging markets in Asia adding to the selling pressure. A favoured trade has been shorting the Aussie against the euro, which saw the single currency jump 1.3 pct overnight to A$1.4315 , its highest in more than two years.
* New Zealand dollar also slides 1.3 percent to $0.7855. Investors await a reading of Q1 GDP in the country at 2245 GMT. Economists expect the economy grew 0.6 percent in the quarter, slowing from a strong showing in Q4.
* Aussie and kiwi could fall further if Asian share markets and emerging currencies sell-off in response to the Fed's announcement.
* Investors also anticipate a reading of China manufacturing PMI later in the day. Any fall in the HSBC reading would hurt the Antipodeans given concerns about Chinese demand for their resources.
* TWI Aussie hangs near a 1-1/2-year low hit last
week as Aussie comes under particular pressure as a slowing in the Fed's asset buying would contrast with the possibility of more interest rate cuts in Australia.
* Kiwi support seen at $0.7800, which has held during the kiwi's sell-off since May, although a break below that level would prompt a test around $0.7455 the 2012 low. Offers suspected above $0.7950 expected to cap any upside. * Australian government bond futures tumbled in NY trade as 10-year Treasury yields shot up to 2.63 pct, just under a major chart level at 2.39 pct.
* The three-year contract indicated down 0.120 points at 97.310, while the 10-year contract falls 0.170 points to 96.400.
* New Zealand government bonds sell off in early trade, pushing yields as much as 16.5 basis points higher at the long end of the curve.
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