SYDNEY/WELLINGTON: The Australian and New Zealand dollars shot higher on Thursday after a raft of upbeat data in New Zealand combined with broad weakness in the greenback bolstered appetite for the commodity currencies.
The kiwi dollar rose more than a cent to a session peak of $0.8078 after strong data on manufacturing fuelled talk it would be the first developed nation to hike interest rates, even if this won't happen for a while yet.
The growing expectations of rising New Zealand interest rates appeared to spur yield-seeking investors eager to get exposure to higher returns.
Yields on New Zealand two-year debt surged to 15-month peaks at 3.15 percent, far above the meagre 0.34 percent offered by US Treasuries.
It received a further boost following a sharp bounce in consumer confidence at home and a solid increase in employment ads in July.
"Strong consumer confidence, PMI data and job ads combined with dollar weakness across the board boosted the kiwi," said Greg Gibbs, a strategist at Royal Bank of Scotland in Singapore.
Market pricing raised the chance of tightening over the next 12 months, with analysts forecasting a move in early 2014. Swap rates now imply a total of 80 basis points worth of tightening, up from 69 basis points last week.
In contrast, many investors think Australia's central bank will have to cut at least one more time to support activity as a long boom in mining investment finally crests.
Gibbs said the kiwi could yet struggle as it faced stiff resistance around $0.8100-$0.8105, a peak from July. It was last at $0.8059, having recovered from a trough of $0.7670 set last week.
Kiwi strength helped drag the neighbouring Australian dollar higher to $0.9176, from $0.9112 in early trade.
Underpinning the Aussie were recent gains in global commodity prices as markets priced in less risk of a hard landing in China following encouraging data there.
Particularly notable has been a rally in iron ore, Australia's single biggest export earner. The mineral touched a five-month high on Wednesday having risen 29 percent since June to $142.40 a tonne. All of which has helped the Aussie bounce from $0.8907 after the Reserve Bank of Australia (RBA) chopped rates to record lows last week.
"The significant increase in iron ore prices supported the Aussie. It could very well get squeezed higher," said Gibbs, seeing a possible test around $0.9300.
Immediate resistance was seen at $0.9211, the 76.4 percent retracement of the $0.8848-$0.9320 move.
The Antipodean currencies extended gains versus the yen with the Aussie up at 89.74 yen, having climbed 1.5 percent this week. The kiwi fetched 78.74 yen, up from a low of 76.15 touched last week.
Australian government bond futures were lower after breaking chart support on Wednesday. The three-year bond contract shed 6 ticks to 97.250, while the 10-year contract retreated 7 ticks to 96.075.
New Zealand government bonds eased with yields as much as 7 basis points higher at the long end of the curve.
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