A big interest rate cut from the Reserve Bank of Australia bolstered the aussie and kiwi dollars, reducing the risk of a further fall.
The key Australian rate is now at 5 per cent, the same as the United States.
The kiwi finished at 40.40USc. The aussie closed locally at 48.75USc, pulling out of nosedive which saw it hit a record low yesterday at 47.75c.
The rate cut, while negative for the Australian currency on a yield basis, was welcomed as the right move to revive the economy.
Earl White, a director at Greenwich Financial Services, said the Australian dollar was "tentatively" stabilising.
Also supporting the Australasian dollars was a strong rally in the euro, which finished at 89.60USc from 88.25c as the greenback got smacked by a slump on Wall St driven by earnings warnings.
Mr White noted the pressure the RBA's cut had put on the Reserve Bank of New Zealand to ease its official cash rate, now at 6.25 per cent - a favourable yield story for the kiwi but nonetheless out of sync with what the rest of the world is doing.
He expected 5.50 per cent to be reached by June and hoped for some strong comments rather than "pontification" on April 19 from Governor Dr Don Brash.
"If Brash pontificates on the 19th that could be the next risk the NZ dollar faces," Mr White said.
The debt market rallied heartily following the RBA's move. The short- and medium-term bonds followed their Australian counterparts and long bonds continue to tail US Treasuries. The 90-day bills rallied to 6.08 per cent.
- NZPA
<i>Currency:</i> Kiwi rallies on rate cut
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