SYDNEY: The Australian and New Zealand dollars were clinging to support on Thursday as the risk of early Federal Reserve rate hikes roiled global markets to the benefit of the U.S. currency.

The Aussie was hanging on at $0.7114, finding support just under $0.7100 having briefly touched a 13-month trough of $0.7063 late on Tuesday. The next major bear target is a low from November last year at $0.6990. The kiwi dollar was also in trouble at $0.6822, uncomfortably close to its 13-month low of $0.6773. There is now not much in the way of chart support until $0.6700.

Both currencies were undermined by another bout of risk aversion which saw Wall Street swing lower overnight and longer-term Treasury yields fall sharply as the market prices in the risk of a more aggressive U.S. policy tightening.

Analysts at CBA now expect the Fed to complete tapering in April next year and start hiking the funds rate in June, which is already priced in to futures.

CBA, however, expects rates to peak at 2.5% in 2024, far above the market top of 1.5% and an outcome that would likely provide long term support to the U.S. dollar. The Reserve Bank of Australia (RBA) still insists a local rate rise in not likely until at least 2023, though the risk is for an earlier move given data show the economy is rebounding faster than previously expected.