* Underpinned by prospect of more rate hikes, low U.S. rates
SYDNEY, March 23 (Reuters) - The Australian dollar held firm on Tuesday, keeping a grip on gains made overnight when resilience in U.S. stocks wrong-footed short sellers, though it faced tough resistance just ahead.
The local dollar spent the session around $0.9175, after recovering from a $0.9085 low offshore. Offers were seen at $0.9190 and the recent $0.9225 high, while support came in at $0.9085 and the 100-day moving average at $0.9065.
The Aussie was also up near 10-week highs in trade weighted terms <=AUD> but faces a tough chart barrier at 71.7 that has persisted since October.
The improved mood seemed to owe much to late gains in U.S. stocks, which confounded fears the passage of President Barack Obama's health care bill would send markets sliding. <.SPX> [.N]
Still, traders suspected the currency would be capped at $0.9225/45 while the market awaits the outcome of a euro zone summit meeting on Thursday and Friday which has the potential to rock the euro.
Germany and some of its European partners clashed again over support for debt-laden Greece, which wants at least the promise of aid to help narrow its bond spreads and make refinancing easier. [ID:nLDE62L0HG] [ID:nLDE62L22T]
The euro slid to a three-week low on the U.S. dollar early Monday before paring its losses. It remained near decade lows on the Aussie on Tuesday at A$1.4770 .
A short-covering bounce also lifted the Aussie back to 82.79 yen, having dipped as low as 81.68 yen on Monday.
There were no domestic data on Tuesday and nothing due on Wednesday either. The lack of news left bond futures little changed. Three-year futures eased 0.010 points to 94.670, while the 10-year contract added 0.020 points to 94.305.
However, a speech on the economy from Reserve Bank of Australia Assistant Governor Philip Lowe on Thursday would likely reiterate the central bank's upbeat outlook and remind investors that interest rates would rise further. The market is currently implying a 44 percent chance of a rate hike in April and is fully priced for a rise to 4.25 percent by June.
"With global equity prices breaking to new post-Lehman highs, it wouldn't take much for RBA at its April meeting to again conclude that it remained appropriate for rates to move gradually towards normal levels, and that it was timely to take another step in that direction," said Rory Robertson, interest rates strategist at Macquarie.
That outlook remains a marked contrast to other major developed nations. A top U.S. Federal Reserve official on Tuesday said unacceptably high unemployment and well-contained inflation make it likely that U.S. monetary policy will remain accommodative for at least several months more.
Speaking to reporters in Shanghai, Chicago Federal Reserve Bank President Charles Evans said he strongly supported maintaining the current loose monetary stance as long as inflation remained under control. [ID:nSGE62M049] ________________________________________________________________ FUTURES AND CASH YIELD 90-DAY BILL (MAR) 95.34 ( 0.00) AUD3MOIS= 4.16 (4.16) 3-YR BOND (MAR) 94.67 (-0.01) AU3YT=RR 5.16 (5.15) 10-YR BOND (MAR) 94.305(+0.02) AU10YT=RR 5.67 (5.68) AUD/USD 0.9175 (0.9143) US10YT=RR 3.67 (3.69) --------------------------------------------------------------- AUD VS 2-YR 10-YR *AUD 3-YR/10-YR SPREAD USD +395 (+390) +200 (+199) *FUTURES +0.365 (+0.390) CAD +330 (+323) +222 (+219) *AUD 2-YR/10-YR SPREAD NZD ~ ( ~ ) -25 (-24) *CASH
+75 (+79) --------------------------------------------------------------- (Reporting by Wayne Cole; Editing by Ed Davies)
