By Gyles Beckford and Cecile Lefort
SYDNEY/WELLINGTON, Nov 18 (Reuters) - The Australian and New Zealand dollars hovered around three-week highs versus the yen on Monday as yield-hungry investors piled into carry trades, setting up a test of important chart resistance.
The Aussie rose as far as 94.11 yen, having gained two yen in four sessions. A break above 94.35, the high of Oct. 24 and a major retracement level, would target the five-month peak of 95.64 set in October.
The kiwi made the most advance against the yen, climbing to a three-week high of 83.81 yen. It has risen 4 percent since an October low and a break above 84 yen would take it to its highest since May.
The safe-harbour Japanese currency has been weighed down by an uptick in risk appetite and by expectations the Bank of Japan (BOJ) will maintain its ultra-loose monetary policy when it ends its two-day review on Thursday.
The BOJ has been perhaps the most aggressive of any major central bank in its asset buying, putting downward pressure on the yen in the process and encouraging investors to borrow at low rates in yen to buy higher yielding currencies.
'A lot of people see this as a pretty decent environment for carry trades,' said Sean Callow, a currency strategist at Westpac.
'The Aussie and kiwi offer high yields and stability of cash rates into year-end, with the kiwi particularly appealing because New Zealand's central bank is effectively promising rate hikes next year.'
Against the U.S. dollar, the Aussie was firm at $0.9378 , having bounced from last week's low of $0.9260.
It has lost nearly 1 percent so far this month, partly on uncertainty about when the U.S. Federal Reserve will start reducing the amount of bonds it buys.
Data from the Commodity Futures Trading Commission showed currency speculators have recently increased their short positions against the Aussie dollar.
Resistance was found at $0.9395 with dealers citing stops just above the figure. Support was seen around $0.9260.
The New Zealand dollar was on the front foot at around $0.8340, briefly touching a 10-day high of $0.8358.
'(The) New Zealand dollar remains hostage to the gyrations of Fed tapering expectations,' said Westpac Senior Strategist Imre Speizer.
'Near term, New Zealand fundamental news remains positive...while U.S. data is mixed, supporting the New Zealand dollar. A push to $0.8400 is expected this week.'
Support for the kiwi is seen initially at around the 20-day moving average of $0.8310 with resistance at $0.8385.
The run of positive data continued with a survey showing service sector activity at a six-year high, which backs expectations of solid economic growth for the third quarter.
New Zealand's positive economic outlook and likelihood of higher interest rates also supported the kiwi against most majors, notably the neighbouring Aussie, which dipped to a six-week low of NZ$1.1199.
New Zealand government bonds were flat.
Australian government bond futures eased, with the three-year bond contract down 2 ticks at 96.890. The 10-year contract also lost 2 ticks to 95.830.
(Editing by Christopher Cushing) Keywords: MARKETS AUSTRALIA/FOREX
(Cecile.Lefort@thomsonreuters.com)(+61 2 9373-1234)(Reuters Messaging: email@example.com)
Copyright Thomson Reuters 2013. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.