SYDNEY/WELLINGTON, June 6 (Reuters) – The Australian and New Zealand dollars held on to hefty gains on Friday after the European Central Bank announced a long-anticipated easing package which gave a fillip to global risk sentiment.
The Aussie was firm at $0.9332, having gained 0.7 percent on Thursday when it touched a three-week high of $0.9347.
The kiwi recouped all the losses suffered earlier in the week to reach $0.8490, leaving behind a trough of $0.8400.
“USD selling was the theme of the night and it was almost a classic ‘risk on’ reaction,” said Michael Turner, a strategist at RBC Capital Markets in Sydney.
He said the Aussie gains versus the USD looked sustainable for the time being, but not in the longer-term.
“We should not, for a second, discount the possibility of the RBA (Reserve Bank of Australia) being a touch more vocal on the (high) currency,” he said, seeing the Aussie slipping to 90 cents on a six to 12 month horizon.
The Aussie hovered near three-week highs versus the yen at 95.45 yen , a gain of 0.8 percent for the week. It was steady on the euro after a volatile session which first sent the common currency as low as A$1.4500 before staging a vicious short-covering rally.
The euro was last at A$1.4631 and on track to end the week exactly where it started. Likewise against the kiwi, it initially sank to a one-week low of NZ$1.5966, before clawing back to around NZ$1.6079.
The euro bounce came even as the ECB cut interest rates to record lows and launched a series of measures to pump money into the sluggish euro zone economy.
The kiwi was supported as the Reserve Bank of New Zealand is widely expected to hike interest rates to 3.25 percent next week, further widening its premium over rock-bottom rates in the euro zone, the U.S. and Japan.
“(The) kiwi has likely seen the high, but it is too soon to be overtly bearish: to do so one must forego a 3.2 percentage point interest rate advantage, which is not to be laughed at,” ANZ analysts said in a note.
Technical support was seen at $0.8486, its 100-day moving average, while the kiwi hovered near the bottom of its Ichimoku cloud around $0.8494. A sustained rise above that would be a technical sign for more gains.
The kiwi pushed to a one-week high around 87.15 yen , while edging up from a six-month low on the Aussie to NZ$1.0980. Against a currency basket , the kiwi rose to 79.12.
New Zealand government bonds were a touch softer, raising yields 1.5 basis points in the belly of the curve.
The next focus point is the U.S. payrolls report due later Friday, where the outcome is considered even more uncertain than usual.
Australian government bond futures were little changed, with the three-year bond contract steady at 97.170. The 10-year contract eased half a tick to 96.225, well off a 10-month high of 96.405 touched last week.