(Add AUD reaction post jobs data)
By Cecile Lefort
SYDNEY, March 16 (Reuters) - The Australian and New Zealand dollars held solid gains on Thursday after the U.S. Federal Reserve stuck to its outlook for monetary tightening this year, offsetting pressure from underwhelming local economic data.
The Australian dollar AUD=D4 stood at $0.7695, having gained 2 percent on Wednesday trading in New York. It briefly touched a three-week peak of $0.7720 where it ran into heavy resistance.
It dipped nearly a quarter of a U.S. cent after a disappointing jobs report. Australia's employment fell 6,400 in February against a forecast rise of 16,000, while the jobless rate ticked up to 5.9 percent, from 5.7 percent. is hard to ignore the highest unemployment rate since January last year, so it was a logical pullback for the Aussie," said Sean Callow, a senior currency strategist at Westpac.
"It reinforces the view that the Reserve Bank is on hold, but if there is any change, the risk for rates is on the downside."
The labour market is a concern for Australia's central bank as jobs growth has been heavily skewed toward part-time work.
It has kept rates at a record low of 1.5 percent since mid-last year. Interbank futures 0#YIB: imply a mere 4 percent chance of another cut by September.
Still, the Aussie stood tall largely due to heavy U.S. dollar selling overnight after the Fed disappointed bulls with a less aggressive rate hike projection than they had wagered on. the Tasman Sea, the New Zealand dollar NZD=D4 was also holding gains at $0.7024, having risen 1.8 percent after the Fed decision.
It dipped modestly after data showed the domestic economy grew 0.4 percent in October-December, from the previous quarter, versus a 0.7 percent forecast. slight setback in the gross domestic product did not change market expectations for steady interest rates from the Reserve Bank of New Zealand (RBNZ).
"Today's result is unlikely to alter the RBNZ's view that the outlook for GDP growth remains strong," said Katie Hickie, an economist at Capital Economics.
"We expect interest rates will remain on hold at 1.75 percent for this year and next year, given that the outlook for underlying inflation remains weak."
New Zealand is one of the strongest economies in the Western world with annual growth of 2.7 percent.
New Zealand government bonds 0#NZTSY= gained, sending yields 4.5 basis points lower across the curve.
Australian government bond futures rose, with the three-year bond contract YTTc1 up 9.5 ticks at 97.950. The 10-year contract YTCc1 jumped 11 ticks to 97.1450 in a bullish flattening of the curve. (Editing by Richard Borsuk and Randy Fabi)