By Swati Pandey
SYDNEY/WELLINGTON, March 20 (Reuters) - The Australian and New Zealand dollars rose on Monday as the greenback weakened and investors unwound previous bets the Federal Reserve would hike U.S. interest rates at an aggressive pace this year.
The Australian dollar AUD=D4 inched 0.25 percent higher to $0.7719, a level not seen since Feb. 23. The Aussie made hefty gains last week, rising 2 percent to post its best weekly performance since Jan. 13.
The New Zealand dollar NZD=D4 climbed 0.33 percent to $0.7036, its highest since March 2. The Kiwi also posted strong gains last week, up 1.3 percent.
"Though the bounce was a reflection of U.S. dollar weakness, the Aussie is also getting a double whammy benefit from high commodity prices," said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
The U.S. central bank last week delivered an interest rate hike, as anticipated, but did not alter its earlier forecast for a total of three rate increases this year. That disappointed dollar bulls who had hoped for hints of a possible fourth hike and for more aggressive forecasts for next year.
Chinese iron ore futures last week boasted their biggest weekly gain in two months underpinned by strength in steel prices.
"The big question is whether the Aussie can kick higher or whether 77 cents is going to continue to be a graveyard for the bulls," said McKenna.
The Aussie has faced stiff resistance in the $0.7700/7740 band since early February and has repeatedly failed to break above.
There was limited initial reaction to the Group of 20 meeting over the weekend which retained the familiar form of words on currency intervention but dropped a pledge to avoid trade protectionism. Zealand government bonds 0#NZTSY= gained, sending yields across the long-end of the curve down 4 basis points.
Australian government bond futures rose too, with the three-year bond contract YTTc1 up 2 ticks at 97.940. The 10-year contract YTCc1 added 4.5 ticks to 97.140. (Editing by Sam Holmes)