The Australian and New Zealand dollars held on to most of their gains against the US dollar and yen on Tuesday, after dovish comments from Federal Reserve Chief Ben Bernanke gave risk assets a fillip. The Australian dollar consolidated at $1.0519, from $1.0524 in New York, well off a two-month low of $1.0336 set late last week. Resistance was found around $1.0600, the 55-day moving average, with initial support at $1.0500.
The New Zealand dollar paused at $0.8219, barely changed from its late New York level, having traded a tight 20 pip range in a quiet session. Against the yen, the Aussie and kiwi dollars ran into a bit of profit taking, having jumped more than 1.2 percent since Monday. They posted their biggest weekly loss since November on Friday.
The Aussie nudged down to 87.14 yen, but stayed well off a two-week trough of 85.24, while the kiwi eased a touch to 68.11, having recovered from 66.50 plumbed last week. "Europe will probably react to the Fed's comments and that should lift the euro and Aussie higher," said Joseph Capurso, a strategist at Commonwealth Bank of Australia (CBA).
With another Bernanke speech due later on Tuesday in the United States, Capurso expects the Aussie to test the offshore high of $1.0546. In the medium term, however, Capurso sees hurdles for risk assets as euro zone finance ministers meet later this week to increase the region's financial firewall. Indications that Germany is prepared to allow two rescue funds to operate concurrently to fight the region's debt crisis had helped revive investor appetite. New Zealand government bonds had a soft tone through the session, sending yields two basis points higher. Australian debt futures were steady with the three-year contract flat at 96.330 and the 10-year up 0.01 point at 95.775.