SYDNEY/WELLINGTON (Reuters) - The Australian and New Zealand dollars held hefty gains on Thursday as investors toyed with the idea of an early end to U.S. rate hikes, a radical development that would likely be bullish for risk assets, emerging markets and commodities.
Data on Australian business investment also had an upbeat message with a sharp upward revision to spending plans auguring well for continued economic growth.
The Aussie dollar <AUD=D3> was enjoying the view at $0.7299 after climbing 1.1 percent overnight, its best daily performance in a month. Bulls were now eyeing the November top at $0.7338, a break of which would take it to territory last trod in August.
The New Zealand dollar <NZD=D3>, or kiwi, eased off a touch to $0.6844, having risen 1.2 percent overnight only to meet stiff resistance above $0.6880.
The bounce came after Federal Reserve chair Jerome Powell said interest rates were "just below" neutral - the level that neither stimulates nor drags on growth.
"Combined with emphasising the usual long-and-variable lags of monetary policy in terms of the impact of past hikes, the message hinted at a slowing in the pace of normalisation," JPMorgan economist David Hensley wrote in a note.
"Not surprisingly, the dovish message was well received in the financial markets with a rally in U.S. equities and bonds."
The futures market <0#FF:> is still pricing in a hike for next month, but is now implying only one more in all of 2019 and an extended pause from then on.
Such an outcome would threaten the U.S. dollar's yield advantage over its peers, which had been its greatest asset over the last couple of years.
The Aussie was further underpinned by data showing firms now planned to invest A$114 billion in the year to June 2019, a marked improvement from just a few months ago.
"Underpinned by record profitability, Aussie businesses are expected to lift spending significantly over the next nine months," said Craig James, chief economist at CommSec.
"It was the biggest equivalent upgrade in spending plans for 19 years."
New Zealand businesses were sounding less cheerful with an ANZ bank survey showing a net 37.1 percent of respondents expected the economy to deteriorate over the year ahead.
In debt markets, bonds held onto their overnight gains with Australian 10-year yields <AU10YT=RR> the lowest in a month at 2.62 percent. The three-year bond future <YTTc1> was up half a tick at 97.900, as was the 10-year contract <YTCc1> at 97.3800.
New Zealand government bonds <0#NZTSY=> gained, sending yields 2.8 basis points lower at the long end of the curve.
(Reporting by Wayne Cole and Charlotte Greenfield, editing by Eric Meijer)
