By Cecile Lefort and Rebecca Howard
SYDNEY/WELLINGTON, Feb 4 (Reuters) - The Australian and New Zealand dollars held near one-month highs on Thursday after a sharp fall in their U.S. counterpart and a rebound in oil prices sparked a revival in risk appetite.
The Australian dollar AUD=D4 was up at $0.7175, after a 1.8 percent rally overnight saw it punch through major resistance around $0.7140 amid heavy short-covering.
The next big chart target is at $0.7330, the 200-day moving average and a top from late December.
Much of the move was due to a broad selloff in the U.S. dollar on speculation the Federal Reserve might opt to not raise interest rates at all this year. USD/
The chatter around the Fed's policy path came after William Dudley, president of the Federal Reserve Bank of New York, on Wednesday said financial conditions are considerably tighter and a weakening outlook for the global economy would have to be taken into account. underpinning commodity currencies was an 8 percent jump in oil prices and a 2 percent gain in the price of iron ore, Australia's top export earner.
The Aussie also recovered some ground against the yen to 84.75 yen AUDJPY=R , from a low of 83.17 on Wednesday. It was still down 1.1 percent for the week.
The strength in the Aussie would likely not be welcomed by the Reserve Bank of Australia which has been counting on a weak currency to stimulate the economy.
The central bank releases its quarterly statement on monetary policy on Friday and is expected to leave the door open to further cuts in interest rates if needed.
The New Zealand dollar NZD=D4 stood firm at $0.6675, not far from a one-month peak around 67 cents. It surged 2.3 percent on Wednesday, the largest one-day percentage increase since March last year.
Providing support was a strong domestic jobs report on Wednesday which raised a question mark about the need for further rate cuts there.
"Momentum gained and accelerated hard through $0.6600 as the market questioned the Fed's ability to raise rates in the current environment," said OM Financial private client manager Stuart Ive.
New Zealand government bonds 0#NZTSY= eased across the curve, sending yields 4 basis points higher.
Australian government bond futures edged off multi-month peaks, with the three-year bond contract YTTc1 down 5 ticks at 98.160. The 10-year contract YTCc1 also lost 5 ticks to 97.4300, having surged to 97.5100, a level last touched last in August.
The 20-year contract YXXc1 eased 5.5 ticks to 96.9150. (Editing by Shri Navaratnam)