By BNZ Currency Strategist Danica Hampton The NZD/USD has spent the past 24 hours consolidating within a 0.6650-0.6800 range. Global equity markets stabilised last night amid hopes the US Congress will pass a revised version of the proposed US$700b bank rescue plan today. Investor confidence was also given a bit of a boost by news that famed investor Warren Buffet is buying US$3b in General Electric perpetual stock. The rebound in risk appetite helped underpin risk sensitive currencies like NZD, particularly against "˜safe-haven' currencies like JPY. Steady demand for NZD/JPY provided a bit of a prop for NZD/USD, which pushed up to around 0.6790. It's worth noting, the NZD/AUD has climbed steadily over the past few days. NZD/AUD started the week around 0.8200 and climbed above 0.8500 last night. We suspect much of this NZD/AUD simply reflects market positioning (i.e. investors had larger positions in AUD and unwinding them saw AUD fall more dramatically than NZD). Indeed, given the volatility seen in global equity markets, market participants have had bigger issues to deal with over the past few weeks. In terms of the economic fundamentals affecting NZD/AUD, nothing has materially changed. We still look for economic growth is slow more sharply in NZ than in Australia and for the RBNZ to cut interest rates more aggressively than the RBA. Consequently, we can't see a compelling reason for the NZD to continue strengthening against the AUD. While we've seen a bit of stabilisation in global equity markets over the past 24 hours, against a backdrop of still fragile risk appetite and slowing global growth, we suspect bounces in the NZD/USD will continue to be limited. For today, we suspect bounces will be limited to the 0.6780-6800 region. Initial support is seen ahead of 0.6700, but a break yesterday's low of 0.6640 is needed to suggest the downtrend is gaining momentum. The USD edged up against most of the major currencies last night, propped up by hopes US law-makers would come to an agreement on the US Treasury plan. While US stock markets opened sharply lower (the S&P500 was down more than 2% at one point), stocks trimmed losses as the night progressed. Investors expect a revised version of the proposed US$700b bank rescue plan will be passed by the US Senate today. The revisions reportedly include tax breaks for businesses and alternative government insurance for bank deposits. If passed by the Senate, the next hurdle will be the House of Representatives and investors are hopeful some form of the plan will be finalised by the end of the week. The S&P500 is currently down -0.40% and the US 2-year government bond yield has fallen 8bps to 1.87%. It's become evident over recent days that the strife in financial markets is a global problem (and not solely limited to the US) and this has tended to support the USD. A number of European financial institutions have reported troubles over the past few days and governments from the UK to Germany have nationalised or bailed out five financial institutions. Meantime, in Ireland, the government has offered a two-year blanket guarantee on all deposits and bank debt. Unlike in the US, the European authorities do not appear to be planning a generalised rescue package to shore up the financial sector and concern about the health of European institutions has taken a toll on EUR. EUR/USD slipped from above 1.4150 to below 1.4000 last night, while GBP/USD traded choppily within a 1.7650-1.7875 range. Economic fundamentals have taken a back seat in financial markets over the past few weeks, but its worth noting last night's economic news was pretty dismal. The UK manufacturing PMI for September contracted for the fifth month in a row, falling to 41.0 "“ its weakest reading since 1992. Given price pressures have peaked, the odds of the Bank of England cutting rates before year-end are increasing. The Eurozone manufacturing PMI also fell sharply to 45.0 in September. Leading indicators are consistent with GDP falling in Q3, which coming on the back of Q2's contraction, will mean the Eurozone is technically in recession. Admittedly, things aren't much better in the US, where the manufacturing ISM plunged to 43.5 in September (well below forecasts for 49.5). Next clues on the health of the US economy will come from Friday's US non-farm payrolls report * Danica Hampton is BNZ's Currency Strategist. All of the research produced by the BNZ Markets team of economists is available here.