By Wayne Cole
SYDNEY, March 25 (Reuters) - The Australian and New Zealand dollars were enjoying a relative calm spell on Wednesday after the Federal Reserve's promise to print unlimited amounts of U.S. dollars eased liquidity constraints and boosted hard-hit risk assets.
The Aussie had settled at $0.5967 AUD=D3 for the moment having rallied 2% on Tuesday, the biggest daily gain since mid-2015. The pause followed a madcap run that had seen the currency collapse 11 cents in just eight sessions to hit a 17-year trough at $0.5510.
Resistance is now lined up at $0.6000 with support at $0.5940 and $0.5890.
The kiwi dollar followed much the same path to stand at $0.5823 NZD=D3 , having skidded as low as $0.5469 just a few days ago. It faces resistance at $0.5880, with support at $0.5800 and $0.5767.
The Fed's open-ended commitment to asset buying had helped meet a global rush for the liquidity of U.S dollars, easing pressure on commodity and emerging market currencies.
The central banks of Australia and New Zealand had also stepped up with programmes to buy government bonds aimed at keeping borrowing costs low and credit flowing.
The Reserve Bank of Australia (RBA) has so far bought A$13 billion of bonds in three operations, with the intention of keeping three-year yields down around the 0.25% cash rate.
Yields were last at 0.32% AU3YT=RR , having dived from 0.62% before the RBA first announced its plans.
The central bank also offered to buy state government bonds, known as semis, on Wednesday.
Yields on semis have been nudging higher as the states committed to more fiscal stimulus spending, while tough rules on social distancing aimed at limiting the coronavirus were likely to eat into tax revenue.
The federal government will certainly need to borrow a lot more to fund its stimulus plans and ride out the shock wave from the pandemic.
"The COVID-19 shock to the Australian economy will trigger a deep recession and a sharp spike in the unemployment rate," said Westpac senior economist Andrew Hanlan. "The Federal budget position will deteriorate sharply over this year and next."
As a result, he expected the supply of government debt on issue would balloon by A$250 billion by mid-2021 to reach a total A$820 billion, or roughly 40% of gross domestic product.
The market has, so far, seemed sanguine in the face of such heavy new issuance. Yields on 10-year bonds AU10YT=RR have steadied at 0.99% after briefly spiking as high as 1.53% last week when global markets became dysfunctional.
Yields on New Zealand debt were a little more elevated at 1.48% NZ10YT=RR but again off a peak of 1.80%. (Editing by Jacqueline Wong)