[ForexNews]

Risk appetite improved on expectations of a safe passage of the US bank stress test results announcement, scheduled for Thursday 5pm EST following the 4:15pm EST press conference by Treasury Secretary Geithner and Fed Chairman Bernanke. USD-JPY reversed part of the overnight drop with higher Japanese equities, but JPY drops were much more pronounced against the KRW, AUD and NZD. Better-than-expected labor market data in Australia and New Zealand cooled market expectations of additional rate cuts by the RBA and RBNZ and pushed the AUD and NZD higher. Australia’s unemployment rate unexpectedly dropped to 5.4% in April from 5.7% in March, as opposed to the consensus expectation of a rise to 5.9%, and April employment unexpectedly gained by 27.3K (down 37.2K in March), fully contributed from full-time jobs (+49.1K). The rates on September 2009 bank bill futures surged by 16bp, and AUD-JPY broke above the 38.2% retracement of the July-October 2008 decline at 74.00. New Zealand’s unemployment rate rose to a lower-than-consensus 5.0% in Q1 from 4.7% in Q4 2008, although a drop in the participation rate may have helped limit an increase in unemployment. Employment dipped by 1.1% qoq in Q1, more than offsetting a downward-revised 0.6% qoq gain in Q4 2008. Both NZD-USD and NZD-JPY broke above their 200-day moving averages (0.5876 and 58.04, respectively).