WELLINGTON/SYDNEY: The Australian and New Zealand dollars bounced on Monday as opinion polls showing a lead for Greece's pro-bailout camps helped ease risk aversion and triggered short-covering on the hope Greece may avoid a messy euro zone exit.
The Aussie jumped 1 percent on the day to a one-week high of $0.9871, adding more distance from a six-month low of $0.9690 set last week. It was last at $0.9867 and looked poised to test last week's high of $0.9935.
The Australian dollar fell below $1.00 on May 14, ending its longest stretch in its history above parity.
Traders said markets were looking for an excuse to go higher after recent hefty losses of high-beta currencies.
"I am not surprised at all by the price action, we need a few days of correction," said a trader at a European bank in Singapore.
The risk rally was supported by real money accounts buying the currency and strong Asian bourses, with S&P stock futures adding 0.8 percent.
The same trader anticipated the Aussie heading towards parity between now and the end of the week, given its fall of more than 5 percent this month.
The Antipodean currencies may get a further lift on Friday with the release of US non-farm payrolls. Forecasts focus on a rise of 150,000 for May, from 115,000 in April.
"(But) Another weak number could prompt chatter about another round of quantitative easing, which would hurt the USD and benefit the Aussie and kiwi," the same trader said.
Next week is the Reserve Bank of Australia's monthly policy meeting with markets fully pricing a 25 basis point-easing and a one-in-four chance of a 50 basis point-cut.
Early this month, the RBA eased a surprisingly aggressive half a percentage point in the cash rate to 3.75 percent, citing benign inflation.
Earlier on Monday, Australia's central bank governor acknowledged recent data from China was "on the softer side", likely reflecting the turmoil in Europe and that is something the bank will keep an eye on.
"It appears that the RBA is conceding additional downside economic risks," said Greg Gibbs, a strategist at Royal Bank of Scotland.
As risk appetite improved, Australian government bond futures turned a touch softer with the three-year bond futures contract off 0.03 points to 97.580. It scaled 97.700 last week, its highest since 1992. The 10-year contract eased 0.01 points to 96.880, off an all-time peak of 96.995.
KIWI FLUTTERS
The New Zealand dollar rocketed as high as $0.7630, up around 1 percent on the day. It was last at $0.7621, well off a six-month low of $0.7458 last week.
"In the short-term, a squaring of the speculative community's net short position could result in a spurt higher," said Bank of New Zealand strategist Mike Jones, adding that moves above $0.7650 would likely attract sellers.
Near term support for the kiwi was seen at around $0.7576, the 10-day moving average, below which sits $0.7550.
Currency speculators raised long US dollar positions to the highest level since at least mid-2008, while net shorts on both Australian and New Zealand dollars rose from the previous week's net long positions.
New Zealand has a trickle of local data, including first quarter terms of trade and the latest look at business sentiment, events in Europe loom bigger.
"Global risk aversion can worsen from here and NZ dollar fundamentals and valuation metrics present no impediment to further downside," Jones said.
However, for now, improved risk appetite saw both the Aussie and kiwi advance against the euro and safe-haven yen.
The Aussie rose to 78.24 yen, more than a yen higher from last week's six-month low. Key resistance was found at the daily Tenkan line around 78.50.
The kiwi was sitting around 60.50 yen, having hit 59.13 yen, its lowest since December .
New Zealand government bonds prices were mostly softer, resulting in yields rising as much as 4.5 basis points.