Australia dollar hold gains after jobs and Fed, NZ dollar boosted by GDP

[SYDNEY] The Australian and New Zealand dollars held gains against the greenback on Thursday, buoyed by better-than-expected Australian jobs data and after the US Federal Reserve scaled back its rate hike projections, but the Aussie hit a four-year low against the yen.

The Antipodean currencies had already been on the rise on broad US dollar weakness after the Fed said at its policy meeting that slower economic growth would crimp the pace of monetary policy tightening in future years.

The Aussie's fall against the safe-haven yen reflected the Japanese currency's status as the main beneficiary of market jitters about Britain's potential withdrawal from the European Union.

Against the greenback, the Australian dollar was a touch lower at US$0.7397, from US$0.7409 early, but still near this week's peak of US$0.7450, a level tested twice in two sessions. A break above that would test a one-month high of US$0.7505. Key support was found around US$0.7330.

The exchange rate popped to US$0.7445 after data showed 17,900 jobs were added in May, topping forecasts of 15,000, but it quickly faded after details suggested that all the gains were in part-time work.

Unemployment held steady at a near three-year low of 5.7 per cent.

"It is no fluke - economic growth has picked up, and the jobless rate has come down," said Craig James, chief economist at CommSec, noting consistent improvement in the unemployment trend over the past year.

"That suggests the Reserve Bank of Australia will stay on the interest rate sidelines until August at which point it will have digested the latest inflation data," he said.

Interbank futures pricing implies a 58 per cent chance of a rate cut in August and are fully priced for a move by the end of the year.

Last week, the central bank kept rates at a record low of 1.75 per cent at its monthly policy meeting, citing recent reasonable strength in the economy.

Against the yen, the Aussie dropped 1.4 per cent on the day to 77.46 yen, having skidded seven yen since late April.

It was also on the backfoot against its New Zealand cousin at NZ$1.0449, down 0.8 per cent on the day and nearing a recent trough of NZ$1.0400. A break under would be the lowest in more than a year.

The New Zealand dollar was the clear outperformer after better-than expected GDP data sent it 0.7 per cent higher to US$0.7077, pulling closer to a one-year peak of US$0.7148.

New Zealand's economy grew 0.7 per cent in the first quarter and 2.8 per cent on the year, beating forecasts of 0.5 per cent and 2.6 per cent respectively.

The kiwi was unmoved by a drop in whole milk prices at a global dairy auction held on Thursday.

Dairy is New Zealand's top export earner.

New Zealand government bonds eased, sending yields 1 basis points higher at the long end of the curve.

Australian government bond futures neared record highs, with the three-year bond contract up 3.5 ticks at 98.520. The 10-year contract added 5.75 ticks to 97.9750 in a bullish flattening of the curve.

The 20-year contract gained 4.25 ticks to 97.3900, with each contract having scaled all-time records in the last 24 hours.

REUTERS