SYDNEY/WELLINGTON: The New Zealand dollar leapt to a 6-1/2-month high and the Aussie to a one-month peak as an aggressive new stimulus programme from the Federal Reserve sent the US dollar reeling.
The NZ dollar surges to $0.8344, its highest since early March, having gained 5 pct from a trough of $0.7915 hit last week. It has made a clean break above its 55-weekly moving average, offering a bullish signal for now.
Kiwi on track to gain 2.6 pct this week, its best performance this year. Support seen around $0.8250, while offers suspected above $0.8350.
Aussie powers up to $1.0579, having risen almost 4 pct since it plumbed $1.0165 just a week ago. The Aussie is now within easy reach of the August peak of $1.0615.
Aussie set to post a weekly gain of 1.7 pct, its best such performance since early July. A break above $1.0615 would take the Aussie to its highest since March. Support seen around $1.0490/0500.
Risk assets from equities to gold, oil and commodities buoyed after the US central bank pledged on Thursday to buy $40 bln in MBS a month, until the economy recovered properly and unemployment fell substantially.
Antipodeans set to bounce higher as carry trades look very appealing with the Fed's commitment to keeping rates super-low out to 2015. Also helping is a less volatile environment with a firming up in equities and commodities while the VIX index sinks 11pc.
All of it is setting a favourable environment for investors to use the US dollar as a funding currency to buy the high-yielding Aussie and kiwi.
Aussie, kiwi rally across the board, pushing up towards multi-week highs versus the yen and sterling.
Kiwi also outperforms the Aussie, which skids to around NZ$1.2673, having troughed to NZ$1.2631 on Thursday, its lowest since April.
Aiding the kiwi is a recent rebound in dairy prices, while Australia iron ore prices fall.
Strength of the Aussie sits at odds with recent falls in Australia commodity prices and adds to pressure on struggling sectors such as manufacturing, arguing for another cut in interest rates.
Market has actually been scaling back expectations for a rate cut in October, but many economists see the higher currency as a de facto tightening in policy that needs to be countered by lower interest rates.
Australian government bonds surrender earlier gains with the three-year contract off 0.07 points to 97.320, while the 10-year contract eases 0.04 points to 96.825.
NZ government bonds rise, pushing yields 3 basis point lower across the curve.
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