By Cecile Lefort and Charlotte Greenfield
SYDNEY/WELLINGTON, June 15 (Reuters) - The Australian dollar leapt on Thursday following an upbeat job report, whiles its New Zealand counterpart lost some ground after disappointing growth data.
The Australian dollar AUD=D4 rose to $0.7605, from $0.7588 early, after the local jobless rate fell to four-year lows in May at 5.5 percent, versus forecasts of 5.7 percent. L3N1JC034
Employment jumped a seasonally adjusted 42,000 in May, handily topping forecasts for a 10,000 gain, while annual jobs growth accelerated to a brisk 2.0 percent.
"The much stronger than anticipated rise in employment in May and the larger than expected fall in the unemployment rate will go some way to quashing growing talk of the chance of another interest rate cut by the Reserve Bank later this year," said Kate Hickie, an economist at Capital Economics.
Interbank futures 0#YIB: widened the odds of a rate cut with the December contract giving an 8 percent chance of a move, from 14 percent before the data. Markets are even pricing in a small probability of a tightening by May next year.
Aussie resistance was found at the 2-1/2-month peak of $0.7636 touched on Wednesday.
The Aussie also reached multi-week highs against the pound and euro GBPAUD=R EURAUD=R . It rallied hard against its New Zealand neighbour, up nearly 1 percent to NZ$1.0528 AUDNZD=R , away from a recent four-month trough.
Undermining the New Zealand dollar NZD=D4 was a surprisingly soft gross domestic product report. The kiwi dropped to $0.7210, from $0.7260 early and a four-month peak of $0.7320 set on Wednesday.
The economy grew 0.5 percent in the three months to March, under analysts' forecast of 0.7 percent and well below the central bank's 0.9 percent. an annual basis, the economy expanded 2.5 percent in the first quarter of this year versus forecasts of 2.7 percent.
Still, some economists remain bullish on the local economy.
"Potential growth is quite high in New Zealand with population growth of 2.1 percent and labour force growth above 5 percent. So in the grand scheme of things, 2.5 percent growth is not that bad," said Michael Turner, a strategist at RBC Capital Markets.
For the Reserve Bank of New Zealand, the outcome reinforces the case to keep rates on hold.
"They have rate hikes priced in their profile, but that's way out and today's data is not going to bring that forward," said Turner.
New Zealand government bonds 0#NZTSY= rose, sending yields 6 basis points lower at the long end of the curve.
Australian government bond futures pared back earlier gains, with the three-year bond contract YTTc1 down 1 tick at 98.225.
The 10-year contract YTCc1 was up 5 ticks to 97.6050, while the 20-year contract YXXc1 gained 7.75 ticks to 97.0300. (Editing by Richard Borsuk)