The Australian and New Zealand dollars staged a rebound on Thursday as investors took heart after Chinese stocks showed some tentative signs of stemming a rout that has rippled through global markets. Both Antipodean currencies, particularly the Aussie, are often used as liquid proxies for China plays. Major Chinese indices were firmer in morning trade, a big improvement from Wednesday's panic selloff.
The Aussie climbed 0.5 percent to $0.7469, rising from a six-year low of $0.7372. Its New Zealand peer put on 0.1 percent to $0.6737, peeling off a five-year trough of $0.6620 set earlier in the week. Against the yen, the Aussie roared back to 90.47, from a 17-month low around 89.15. Similarly, the kiwi advanced 0.6 percent to 81.67 yen, off a 20-month trough of 80.62 set overnight. Further aiding the Aussie, Australian employment defied expectations and rose for a second month in June, suggesting the labour market was on the mend.
In contrast, mounting expectations for the Reserve Bank of New Zealand to unwind all of last year's interest rate hikes have weighed on the kiwi. Last month, the RBNZ cut the cash rate for the first time since March 2011 as economic growth slowed. The kiwi has already dropped 14 percent versus the greenback since May, but it continues to look shaky as uncertainties about Greece and plunging Chinese share prices fuelled risk aversion.
New Zealand government bonds slipped, nudging most yields half a basis point higher across the curve. The two-year yield rose 1 basis point to 2.68 percent, edging up from a two-year low of 2.66 percent touched on Wednesday. Australian government bond futures also eased as demand for safe-haven assets waned. The three-year contract eased 2 ticks to 98.140, while the 10-year contract shed half a tick to 97.2050.