Aussie & NZ dollars rally, liquidity plan aids euro

WELLINGTON/SYDNEY: The Australian and New Zealand dollars made a comeback on the greenback on Friday after tracking the euro higher on the prospect of US dollar funding help for European banks.

* The European Central Bank said it will liase with the Federal Reserve, the Bank of England, Bank of Japan and Swiss National Bank to provide dollar loans to banks to prevent the money market from freezing up.

* That lifted the euro, which has suffered much of the week on worries about dollar liquidity crunch and also on Greece's debt woes, which still haunt markets.

* Aussie follows, rising to a high of $1.0346 overnight from $1.0215 in late local trade, before consolidating around $1.0320. It last trades around $1.0327.

* Aussie in better shape, having lost 4 percent in the past two weeks. But it is likely to be capped at $1.0480 while support seen around $1.0240.

* The kiwi around $0.8237, after bouncing to overnight high of $0.8278 from late local trade of $0.8140, not far from a one-month low on the risk of low rates for longer.

* The RBNZ keld rate steady at 2.5 pct on Thursday, but keeping its tightening bias, while warning of uncertain global outlook. That prompts bets that the RBNZ will delay rate rises until the first quarter next year.

* Kiwi likely to ride on improvede risk appetite, with resistance seen around $0.8280 while strong support at $0.8200.

* Market pricing implies 10 pct chance of a 25 bps hike next month, and 46 bps of tightening over the next 12 months.

* Risk sentiment improving, with Wall Street and European equities rising while the CRB commodity index and gold slipping. Copper and oil were higher.

* The euro steady against the Antipodeans, holding around A$1.3423 on the Aussie , having hit a six-week low of A$1.3013 earlier this week. Against the kiwi, the euro a touch higher at NZ$1.6850 from NZ$0.6834 late Thursday.

* Safe-haven demand eases, with benchmark 10-year yields rising to 2.09 pct, from 1.99 pct on Thursday.

* Australian bond futures fell with Treasuries, with the three-year contract down 0.12 points to 96.370 and the 10-year 0.07 points lower at 95.755. NZ government bonds also down, with yield up 6.5 bps across the curve.

Copyright Reuters, 2011