SYDNEY/WELLINGTON: The Australian and New Zealand dollars held on to their spectacular overnight gains on Wednesday, underpinned by a rally in equities and commodities following a pledge by US policy makers to keep rates low out to mid-2013.
The Aussie firm at around $1.0325, having surged 3.4 pct to $1.0418 overnight after the Federal Reserve said it expected to keep rates low for at least two years.
Markets focused on China trade data due later on Wednesday as concerns are mounting about a global recession . The Aussie is particularly sensitive to news from China, its key export market.
Interbank futures surrender some of their recent huge gains as global shares bounce, but still priced for a reversal by the Reserve Bank of Australia (RBA) toward easing.
September contract off a hefty 0.165 points but still fully priced for a cut of 25 basis points to 4.5 pct in September. December drops 0.235 points but still implies a rate of 3.7 pct.
Bond futures modestly easier after wild moves in recent days. Three-year contract off 0.06 point to imply a yield of 3.92 pct. Ten-year down 0.025 point giving a yield of 4.6 pct.
The local currencies' momentum was capped by a combination of profit-taking, talk of a large US seller and yen-buying at the Tokyo fix, according to traders.
Financial markets remain choppy, following two extremely volatile sessions, which has seen the Aussie lose more than five cents. It even briefly sank below parity for the first time since March.
Major resistance at $1.0455, ahead of $1.0528, the Aug. 5 high with first line of support at $1.0234.
Australian consumer sentiment falls for a 4th straight month to hit a 27-month low, according to a private survey, highlighting concerns about the global economic outlook.
The Aussie holds on to huge overnight moves on the crosses, trading at 0.7499 Swiss francs from 0.7150 and A$1.5737 per pound , from A$1.6386. * Against its neighbour, the Aussie lurking near Tuesday's one-year low of NZ$1.2315, and was last at NZ$1.2371. The NZ dollar firm at $0.8340, from $0.8366 in New York, after a 3-cent rally made offshore.
The kiwi was seen holding above the $0.83 handle, analysts at IGM said, and could be preparing for another charge above $0.84.
Despite the return of confidence, markets remain cautious on the chance of the Reserve Bank of NZ hiking rates in the face of the uncertainty, with the implied chance of a hike in September at 24 percent.
Copyright Reuters, 2011
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