SYDNEY (Reuters) - The Australian and New Zealand dollars hovered near multi-week peaks on Thursday as a rally in metals combined with low volatility globally and a soft greenback encouraged leveraged plays in higher-yielding assets.
Australia's commodity-driven currency <AUD=D4> edged up 0.1 percent to $0.7778, within kissing distance from Wednesday's high of $0.7779 - a level not visited since Oct. 24.
The Aussie is seen ending the year about 8 percent higher, reversing the losing streak of the past four years.
Trade was light across the board as many market participants were on holiday.
Thursday's gains came as copper <CMCU3>, seen as a barometer for global growth, held near a four-year high. Gold prices hovered close to a one-month top <XAU=> while oil was not far from this week's 2-1/2 year peak.
Australia is a major exporter of natural gas, metals and iron ore, so higher prices for these commodities add to the country's national income.
The New Zealand dollar <NZD=D4> also joined the party, climbing as far as $0.7077 - a level not seen since mid-October.
The kiwi dollar is up 2 percent for the year, almost matching its lacklustre performance in 2016.
The kiwi had suffered hefty losses in October over fears the country's new Labour-led government would introduce policies that will hurt foreign investment, migration and ultimately economic growth.
But the currency staged a comeback in December to be up 3.6 percent in the month so far.
The gains in the antipodeans have been underpinned by a broadly weaker dollar <.DXY>, which is at a 3-1/2 week low amid expectations other central banks will begin tapering monetary stimulus in 2018, reducing the U.S. dollar's yield advantage.
That stoked carry trades in which investors borrow in low-yielding currencies such as the euro or the yen for higher yielding assets such as the Aussie or the kiwi.
The yield premium demanded to hold Aussie 10-year debt over US Treasuries has widened to 27 basis points from as low as 8 basis points in late November. <AU2YT=TWEB>
"The Aussie bulls have been enthused not just by the near multi-year lows in FX volatility, which has helped the hunt for carry, but...by yield differentials working in favour of AUD appreciation," said Chris Weston, chief strategist at Melbourne-based IG.
New Zealand government bonds <0#NZTSY=> rose in line with U.S. Treasuries, sending yields about 4 basis points lower at the long-end and 2-3 basis points lower at the short-end of the curve.
Australian government bond futures edged higher too, with the three-year bond contract <YTTc1> up half a tick at 97.805. The 10-year contract <YTCc1> rose 2.5 ticks to 97.3050.
(Editing by Shri Navaratnam)
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