By Cecile Lefort and Charlotte Greenfield
SYDNEY/WELLINGTON, Feb 23 (Reuters) - The Australian and New Zealand dollars held near multi-week highs against the pound and euro on Tuesday on worries Britain could exit the European Union (EU).
Sterling hovered at A$1.9570 GBPAUD=R , having dropped 2.8 percent on Monday when it touched A 10-month low of A$1.9484. The pound has shed 7 pence so far this year.
Heavy sterling selling came after London Mayor Boris Johnson announced his support for Britain to leave the EU. The news also took the euro in its stride, down 2 percent to a six-week low of A$1.5149 EURAUD=R . The fall was the euro's biggest one-day drop since October and last stood at A$1.5269.
Also underpinning the Australian dollar AUD=D4 was improving risk appetite fuelled by a sustained rally in iron ore prices. The Aussie stood at $0.7228, not far from a seven-week high of $0.7248 touched on Monday.
The price of iron ore .IO62-CNI=SI , Australia's top export earner, has risen 17 percent so far this year. Its bounce from a multi-year low hit in December underpinned market hopes that the worst may be over.
"We see no reason for the AUD not to move back to the mid-73 cent handle," said Evan Lucas, a strategist at IG Markets. "It's a consequence of risk's return."
Major resistance was found at the 200-day moving average of$0.7278, a level that has contained rallies for 16 months.
The New Zealand dollar NZD=D4 rallied on positive sentiment towards commodity currencies. The Kiwi was trading at $0.6689, from as low as $0.6623 the previous day.
The Kiwi was swept along by this positive sentiment, despite futures for dairy, New Zealand's main export, being flat.
"Commodity currencies head the leader board," said Jason Wong, currency strategist at BNZ, in a research note.
The New Zealand dollar could test February highs around the $0.6750 according to analysts.
New Zealand government bonds 0#NZTSY= were a shade firmer, with yields down a basis point along the curve.
Australian government bond futures edged up, with the three-year bond contract YTTc1 adding 1 tick to 98.220. The 10-year contract YTCc1 added 2 ticks to 97.5650, while the 20-year contract YXXc1 was steady at 97.0100.
The spread between 10- and 3-year government bonds AU3YT=RR AU10YT=RR dipped to 64 basis points, the smallest in 10 months.