The Australian and New Zealand dollars were looking vulnerable on Thursday after a China-inspired rally was punctured by upbeat U.S. manufacturing data that bolstered the U.S. dollar.
The Aussie was flat at $0.6576 AUD=D3 , having backtracked from a high of $0.6621 hit overnight. Support lies around $0.6550, with more down at $0.6525.
The kiwi dollar stood at $0.6112 NZD=D3 , after failing to hold a $0.6148 top the previous session. It now has support at $0.6090 and $0.6062.
Both did hold gains against their Canadian counterpart after the Bank of Canada took a dovish turn by opening the door to future rate cuts.
Yet neither could sustain the bounce made after China's central bank surprised markets by announcing a cut in bank reserve requirements, offering some support to the country's ailing stock markets.
"China's economic performance is unlikely to offer much help to AUD unless the government significantly ramps up policy stimulus, especially in infrastructure construction," said analysts at CBA.
Infrastructure is a major user of steel and thus iron ore, Australia's number-one export earner.
The kiwi had found some support from a consumer price report that showed headline inflation slowed sharply in the fourth quarter, but domestically-driven core inflation topped expectations.
Markets reacted by paring the chance of an early rate cut from the Reserve Bank of New Zealand (RBNZ), lifting two-year swap rates NZDSM3NB2Y= 11 basis points to 4.815%.
The chance of a move in April is now 20%, with a cut in May priced at 68%.
0#RBNZWATCH "While the easing in headline inflation is encouraging, in our view it is unlikely to precipitate rate cuts or a material dovish pivot in guidance in the near term given non-tradable and services inflation remains above the RBNZ's 1-3% target," said Andrew Boak, an economist at Goldman Sachs.
"We continue to expect the RBNZ to remain on hold until August 2024."
The next RBNZ meeting is on Feb. 28, though its chief economist will talk on the economy on Jan. 30.
