WELLINGTON/SYDNEY: The Australian and New Zealand dollars consolidated against the greenback on Thursday, lifted by short covering, stronger stocks and euro, though the mood remains fragile ahead of a crucial vote in Germany.
The Aussie nudged up to $0.9801, from $0.9782 in New York, having hit an overnight peak $0.9956. A well-bid euro and recovering Asian stocks dragged the local dollar higher.
Korean shares rose 2.2 percent, after initially falling one percent, although Japanese stocks were flat.
Dealers also reported some short covering in thin markets.
Earlier, the Aussie had dipped as low as $0.9701, but solid demand at that level, along with Japanese investors buying the Aussie against the yen, helped retrace losses.
For now, support is seen around $0.9672, ahead of a key barrier at $0.9621, the Sept 26 trend low. Major resistance is found at $0.9850, ahead of $0.9986.
A recent sell-off in Asian currencies could suggest some investors might be bailing out of the "strong China" play, making the Aussie, a proxy for Asian currencies, vulnerable while investors stay in this mood.
Markets are eyeing the results of a key vote in Germany to strengthen Europe's bailout fund. With the main opposition supporting the measure, it should pass comfortably and could trigger a risk rally.
"It should be positive for risk assets, even though it is largely expected Germany will support the vote," said Annette Beacher, head of Asia Pacific research at TD Securities in Singapore.
Beacher does not expect any sustained rally, however, as the European debt crisis is far from being resolved.
"We are definitely going to see choppy markets," he added.
The Aussie hit a 10-month low of $0.9622 earlier this week.
NEW ZEALAND DOLLAR
The New Zealand dollar edged up to $0.7782, from $0.7765 late in New York, having bounced off a low of $0.7705.
"It's all about Europe and what happens there, so don't be surprised if it has a bumpy night, and as well people are set to be cautious given its the end of the quarter," said a trader at a local investment house.
The kiwi has fallen nearly 6 percent this quarter, which has seen it hit a 30-year high of $0.8842 and a near six-month low of $0.76358.
Along with the broader market fluctuations, the currency had to deal with comments by the Reserve Bank of NZ Governor Alan Bollard, who said the kiwi is still overvalued.
Bollard said the central bank was "comfortable" with where New Zealand's rates were at present and it had flexibility it to respond to the global turmoil.
"From a monetary policy point of view, New Zealand is in a reasonably sweet sort of spot because we can move rates when we need to," Bollard said in an interview on Radio New Zealand.
For more details see The RBNZ left its cash rate steady at record low 2.5 percent two weeks ago, but indicated it was ready to raise rates to fight inflation when global risks subside.
Financial markets have pushed out expectations of RBNZ rate rises to early next year, and have even priced in a slight chance of a rate cut next month.
Kiwi, whose outlook is set to be driven by developments in Europe, is seen supported around $0.7638, then $0.7547, while resistance is at $0.7902 and above that the 200-day moving average of $0.7957, which the kiwi has failed to break.
The Antipodeans gained ground on the yen, with the kiwi around 59.46 yen , off a six-month trough of 58.21 struck this week. The Aussie at 74.83 yen , stood above a 13-month low of 73.28 yen.
The euro drifted a shade off a 7-week peak against the Aussie, but was still firm at A$1.3901, while it sat around NZ$1.7474 against the kiwi.
New Zealand has a couple of pieces of second tier data on Friday, with building consents and the latest snapshot of business sentiment, although the current global environment is likely to overshadow the numbers.
NZ government bonds trimmed their gains with short dated yields closing 5.5 basis points lower with longer dated just a tick lower.
A record-equalling NZ$1 billion government bond tender on Thursday attracted bids of NZ$1.53 billion.
Australian bond futures gained, with the three-year contract up 0.03 points at 96.380. The 10-year added 0.045 points to 95.740.
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