The Australian and New Zealand dollars gained on Thursday, mirroring a surprise rebound in riskier assets, as investors latched on to the idea that a Donald Trump presidency could spur US economic growth. The Australian dollar added 0.3 percent to $0.7658, after falling 1.7 percent on Wednesday as financial markets were shocked by Trump's defeat of Democrat Hillary Clinton.
The Aussie was still below a high of $0.7772 hit early Wednesday when markets were priced for a Clinton win. Markets had viewed Clinton as the status quo candidate while there was nervousness about Trump's policies on geopolitics and immigration. The carry trade came back with a vengeance late on Wednesday with the Aussie rebounding to 80.77 yen having been down as deep as 76.73 at one stage. It made similar stellar recoveries on the Swiss franc and euro.
Australian government bond futures slumped, in line with US Treasuries. Investors again revised the outlook for US interest rates after Trump's victory, with the probability of a December rate hike by the Federal Reserve going from as low as 30 percent to as high as 80 percent. Futures plunged to 6-month lows, with the three-year bond contract down 14 ticks at 98.30. The 10-year contract dived 25 ticks to 97.56, the largest daily drop since mid-2013.
The New Zealand dollar rose 0.2 percent to $0.7291, only just above Wednesday's trough of $0.7265. The Reserve Bank of New Zealand cut interest rates as widely expected to a record-low 1.75 percent, but added that further easing may not be needed. New Zealand government bonds tumbled, with yields jumping 15 to 23 basis points across the curve.