By Cecile Lefort and Rebecca Howard
SYDNEY/WELLINGTON, Aug 1 (Reuters) - The Australian and New Zealand dollars held hefty gains on Monday after downbeat U.S. economic data late last week pushed back expectations of a rate hike by the Federal Reserve.
The Australian dollar AUD=D4 popped to a two-week high of $0.7616, adding on to a 1.3 percent gain on Friday in the wake of disappointing U.S. growth figures which forced Aussie bears to cover short positions.
It was last at $0.7610 with support at $0.7490 and resistance at $0.7650.
The Aussie's gain of 2 percent will only add to the case of an interest rate cut by the Reserve Bank of Australia (RBA).
The central bank holds its monthly policy meeting on Tuesday and a majority of economists favour a basis point to a new low of 1.5 percent.
Out of 49 analysts polled by Reuters 38 expected more stimulus, largely to curb an unwelcome slowdown in inflation. futures 0#YIB: put the probability of a move around 60 percent and are fully priced for a cut by the end of the year.
Yields on two-year government paper AU2YT=RR are already down at 1.47 percent in anticipation a cut - a level never seen before.
Australian bond futures also scaled fresh all-time peaks, with the three-year bond contract YTTc1 up 5 ticks at 98.640. The 10-year contract YTCc1 rose 5 ticks to 68.1650, while the 20-year contract YXXc1 was steady at 97.5000.
The Antipodean currencies bounced 1 percent against the yen, having recovered some ground since Friday. The Bank of Japan underwhelmed markets late last week with an additional stimulus measure that fell far short of what some had hoped. AUDJPY=R NZDJPY=R
Across the Tasman Sea, the New Zealand dollar NZD=D4 paused at $0.7222, having leapt nearly 2 percent on Friday.
It was marking time ahead of the RBA meeting as a decision not to cut was likely to see the Aussie rise sharply on the kiwi, and relieve some pressure for a policy easing at home.
The Reserve Bank of New Zealand (RBNZ) holds its rate review on August 11 and markets are wagering heavily on a cut.
"Failure to deliver a clear, concise easing plan when the monetary policy statement is released on the 11th will send the NZD to continue to test higher," said OM Financial Limited Private Client Manager Stuart Ive.
New Zealand government bonds 0#NZTSY= gained, sending yields around 5 basis points lower across the curve.