SYDNEY/WELLINGTON: The Australian dollar broke clear above $1 on Thursday after the Federal Reserve began a new chapter in quantitative easing, while the New Zealand dollar hit 29-month highs after surprisingly strong jobs data. A bold promise from the Fed to buy $600 billion worth of government bonds by the end of June 2011 to boost the languid US economy had encouraged investors to sell the U.S. dollar to buy assets that offer higher returns. With Australian interest rates the highest in the developed world at 4.75 percent and the central bank keen to raise them even further, the Australian dollar could remain a crowd favourite for investors looking for yield. "It's very hard to buy the US dollar right now. I would tell investors to buy the Australian dollar, the euro and the yen," said Greg Gibbs, a currency strategist at RBS. "The Aussie dollar is not going to come down below parity significantly until there are signs U.S. rates are going to rise." Traders clearly agreed. The Aussie dollar was strong at $1.0045 after jumping as far as a 28-year high of $1.0064 in the wake of the Fed's announcement. For the year, it has gained 12 percent, ranking it the second best-performing currency after the yen. Even surprisingly soft retail sales in September and the third quarter did not temper the currency or cool bets for more domestic rate rises. Charts showed next resistance levels were along an upward trend channel at $1.011 and $1.0175. Stop-loss buy orders were seen above $1.0100. Interbank futures showed investors saw a 30 percent chance of rates rising to 5 percent by February, way above US rates which are near zero. Underlining the Australian dollar's yield advantage, the spread between two-year Australian and US yields hit a 1-1/2-year high of 469 basis points. Australian bond futures were mixed, with the implied curve flattening on Australia's hawkish rate outlook. Three-year futures off 0.03 points at 94.95 while 10-year futures rose 0.025 points to 94.75. NZ$ NEAR 29-MTH HIGHS The New Zealand dollar was also strong at $0.7850, after vaulting to a 29-month high of $0.7882. It had surged around 1.5 percent for the day following the Fed's move. It then got a second wind from better-than-expected jobs data. The kiwi's strong gains were put down to the improved appetite for high-yield currencies as well as a more certain outlook for NZ central bank rates rises next year. "We expect the RBNZ to sit tight for several months - this employment report merely removes the need to erase the tightening bias, something that was a real possibility only a few weeks ago," said TD Securities senior strategist, Annette Beacher. New Zealand's unemployment rate fell to 6.4 percent in third quarter, with around 23,000 jobs added as the labour market looked to have turned the corner. Past volatility kept analysts cautious about the data, but it was seen confirming the likelihood of a March resumption to RBNZ rate rises. Analysts suggest the kiwi is looking overbought but Finance Minister Bill English said New Zealand was being hurt by the U.S dollar, British pound both being weak and a slowly rising Chinese yuan. "What's offsetting the negative effect of both of those policies for us, both in China and the US, is that our commodity prices are about as high as they have ever been," English told Reuters television in an interview.

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