Aussie & NZ$ hold gains, mood fragile

SYDNEY/WELLINGTON: The Australian and New Zealand dollars held onto overnight gains on Friday, underpinned by a rally in Asian stocks, though they remain vulnerable to euro zone debt worries.

The Aussie consolidates to $1.0318 from $1.0360 in New York, having risen 2 pct offshore on better US job data and. The Aussie is still 1 pct lower so far this week, but above a five-month trough around $0.9924.

Aussie now eyes $1.0418 and $1.0465 after the latest bounce, but markets nervous as a new crisis of confidence gripped Europe's banking industry as its borrowing costs soared.

Equities continue to set the tone for the Antipodeans, with Asian stocks in the black.

The NZ dollar marks time at $0.8255, from $0.8295. It hit an early high of $0.8335 after failing to break through strong resistance around the $0.8325/35 area. Support now seen around $0.8190.

Aussie nudges up on its neighbour to NZ$1.2487 from NZ$1.2418 earlier.

Antipodeans hold on to hefty gains made on the Swissy on speculation the Swiss National Bank might go so far as to peg the franc to the euro to rein in a soaring currency.

The Aussie at 0.7855 francs , having surged 6.6 pct offshore, while the kiwi climbed over 7 pct and was last at 0.6281.

Against the yen, Antipodeans firm with Aussie at 79.30 yen, and kiwi at 63.42 yen with markets on guard ahead of another round of intervention. The Aussie has lost 7 yen so far this month.

Australian bond futures mixed with 3-yr contract down 0.031 points to 96.180 and the 10-year up 0.005 points to 95.550, implying a yield of 4.450 pct.

Interbank futures pared the chances of a rate cut but still fully priced for 25 bps in September and a rate of 3.59 pct by year end.

Markets still pricing a 25 bps, hike by the Reserve Bank of New Zealand in September with tightening over the next 12 months rising to 53 bps from 47 bps. Just a week ago, markets implied a 70 pct chance of a 50 bps hike and more than 100 bps over the next 12 months.

The latest Reuters poll of 17 analysts also shows the majority of economists expect a hike in September, with five calling for a 25 bps hike and five for 50 bps.

NZ government debt prices also fell, with local yields rising as much as five bps.

Copyright Reuters, 2010