SYDNEY, March 16 (Reuters) - The Australian and New Zealand dollars held solid gains on Thursday after the Federal Reserve disappointed U.S. dollar bulls with a less aggressive rate hike projection than they had expected.
The Australian dollar AUD=D4 rose to $0.7704, 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.
The Fed raised interest rates on Wednesday for the second time in three months, as expected, but did not flag any plan to accelerate the pace of monetary tightening. That sent the U.S. dollar into a tail spin as positions were over-stretched. underpinning the Antipodean currencies were rising commodity prices and optimism about China's economy.
Investors are awaiting Australian job data at 0030 GMT. The Forecast is for a gain of 16,000 jobs in February and unemployment steady at 5.7 percent, but the series is notoriously volatile. ECONAU
Across the Tasman sea, the New Zealand dollar stood tall at $0.7022, having gained 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, however, 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 given that the outlook for underlying inflation remains weak."
New Zealand is one of the strongest economies in the Western world with a 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 6.5 ticks at 97.920.
The 10-year contract YTCc1 jumped 8.5 ticks to 97.1200 in a bullish flattening of the curve. (Editing by Richard Borsuk)