SYDNEY/WELLINGTON: The Australian and New Zealand dollars marked time on Thursday, following an offshore rally, as uncertainty gripped FX markets ahead of an ECB meeting which might, or might not, see a rate cut and boost risk assets.
The Aussie marks time at $0.9635, from $0.9654 in New York. It rallied 1 pct offshore after Germany said it would help its own banks if necessary and opened the possibility of using the bailout fund to recapitalise struggling banks.
The Aussie remains vulnerable to wild swings in sentiment driven by the euro zone debt crisis. Immediate support seen at $0.9630 and a break of $0.9680-$0.9710 area could see a ratchet to $0.9770, then $0.9810.
The NZ dollar consolidates around $0.7656, from $0.7652 in NY. Support seen initially at $0.7585 with $0.7700 to cap the topside.
Kiwi down about 13 pct since hitting a 30-year peak of $0.8842 in early August. Still, Reserve Bank of NZ Governor Alan Bollard said late last month the kiwi was overvalued.
The currency is now back above the post-downgrade low of $0.7470 struck on Tuesday. Standard & Poor's and Fitch cut NZ's sovereign rating to double A from double A-plus on Friday on worries about its high foreign debt.
The Aussie and kiwi off multi-month lows against the safe-haven yen in the improved risk climate. Aussie at 73.95 yen , having dipped earlier this week to its lowest since May 2010 at 72.04. Kiwi at 58.70 yen from a five-month trough of 57.33 yen.
Antipodeans recover against safe haven Swissy and euro.
The Aussie nudges higher against the kiwi at NZ$1.2589, from this week's low of NZ$1.2492 .
Investors focussed on ECB meeting, whose outcome seems increasingly uncertain. Markets split on whether it might leave rates unchanged, cut by as much as 50 basis points and/or announce other policy measures to help stimulate the region's economy and support banks.
A rate cut could actually be positive for the euro and risk assets given worries about a recession in the region, so if the ECB does nothing that might be a negative.
NZ debt prices softer in line with US Treasuries as the safety bid pared. Local yields around 5 bps higher along the curve. NZ government's weekly bond tender later likely to be closely watched for the impact of last week's credit ratings downgrades.
Australia's three-year futures contract off 0.06 points to 96.510, while the 10-year eases 0.055 points to 95.855.
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