The Australian and New Zealand dollars held hefty gains on Thursday after a dovish-sounding Federal Reserve surprised US dollar bulls, sending short-term bond yields to record lows. The Australian dollar was firm at $0.7758, having shot up 2 percent overnight when it reached a peak of $0.7846 at one stage. The New Zealand dollar traded at $0.7501, after gaining 2 cents in the wake of the Fed statement.
The Fed downgraded its views on the economy and inflation; lowered its projected interest rate trajectory and highlighted the drag on exports from a strong US dollar.
"The Aussie relief rally may have more legs in the short-term and we could see it towards the 79 cents to 80 cents region," said Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia.
Stiff resistance was found around $0.7840-50.
The euro, however, gained even more to reach A$1.3959, an increase of 2.5 cents since Monday.
A major rally in US Treasuries helped Australian government futures set fresh records. The three-year bond contract jumped 10 ticks to 98.290, having scaled an all-time peak of 98.310. The 10-year contract exploded 14 ticks higher to 97.6900 in a bullish flattening of the curve.
Two-year cash yields dived to 1.75 percent, well below the cash rate of 2.25 percent.
A strong reading of New Zealand's four-quarter domestic economic growth gave an added fillip to the kiwi.
"The Fed has indicated that it may start raising rates ... but the process will be very slow, and that does support currencies such as the New Zealand dollar which have good growth and have yield," ANZ currency strategist Sam Tuck said.
The kiwi rallied to 90.45 yen, its strongest since March 5, helping to lift the currency to a two-week high of 78.47 on a trade-weighted index.
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