By Swati Pandey
SYDNEY, Nov 10 (Reuters) - The Australian and New Zealand dollars gained on Thursday, mirroring a surprise rebound in riskier assets, as investors latched on to the idea that a Donald Trump presidency could spur U.S. economic growth.
The Australian dollar AUD=D4 added 0.3 percent to $0.7658, after falling 1.7 percent on Wednesday as financial markets were shocked by Trump's defeat of Democrat Hillary Clinton.
The Aussie was still below a high of $0.7772 hit early Wednesday when markets were priced for a Clinton win.
Markets had viewed Clinton as the status quo candidate while there was nervousness about Trump's policies on geopolitics and immigration.
"Over time Donald Trump's policies would, as announced, be highly stimulatory, expansionary and, ultimately, inflationary," said Stephen Halmarick, chief economist at Colonial First State Global Asset Management.
"If he was able to get his election policies through Congress, we are likely to see a near-term acceleration in the pace of growth of the US economy and a surge higher in the dollar."
Trump's key policy priorities include generous tax cuts and higher infrastructure and defence spending.
Both the Aussie and its New Zealand cousin are among star performers this year, up 5 percent and 7 percent respectively, largely thanks to carry trades where investors borrow in safer assets such as the yen or the euro to invest in high-yielding currencies.
The carry trade came back with a vengeance late on Wednesday with the Aussie rebounding to 80.77 yen AUDJPY= having been down as deep as 76.73 at one stage. It made similar stellar recoveries on the Swiss franc AUDCHF= and euro EURAUD=R .
Australian government bond futures slumped, in line with U.S. Treasuries.
Investors again revised the outlook for U.S. interest rates after Trump's victory, with the probability of a December rate hike by the Federal Reserve going from as low as 30 percent to as high as 80 percent.
Futures plunged to 6-month lows, with the three-year bond contract YTTc1 down 14 ticks at 98.30. The 10-year contract YTCc1 dived 25 ticks to 97.56, the largest daily drop since mid-2013.
The New Zealand dollar NZD=D4 rose 0.2 percent to $0.7291, only just above Wednesday's trough of $0.7265.
The Reserve Bank of New Zealand cut interest rates as widely expected to a record-low 1.75 percent, but added that further easing may not be needed. FX market interpreted the statement hawkishly," said Imre Speizer, senior market strategist at Westpac NZ.
"The statement suggests a period of policy stability ahead. However given the U.S. election result impact, the pair may struggle beyond $0.7400 on the day."
New Zealand government bonds 0#NZTSY= tumbled, with yields jumping 15 to 23 basis points across the curve. (Editing by Kim Coghill)