28 JUN, 2012, 11.23AM IST, REUTERS
The euro fell to A$1.2331 and NZ$1.5689 , before recovering some ground to last trade at A$1.2361 and NZ$1.5728, a touch softer on the day.
Against the greenback, the Antipodean currencies climbed about 0.3 percent on the day to $1.0113 and $0.7951 respectively.
There was talk a buy order from a U.S. name had triggered stop-loss buying in a thin market, sending the Aussie up as high as $1.0126 and towards resistance at $1.0128, the 61.8 percent retracement of its June 20-25 fall.
Traders said month-end and quarter-end flows might also have played a part, but there was no news that prompted the surprise rally with many players actually reluctant to take big positions heading into the two-day summit.
"With thin volumes and no participation, plus stops, we've a perfect excuse for a short term rally," a trader said.
European Union leaders go into the meetings more openly divided than at any time since the debt crisis erupted in Greece in 2010 and expectations of a breakthrough are very low.
Traders said any positive surprise could fuel risk trades, although the pre-summit rally probably means further gains could be limited.
Conversely, a lack of progress in resolving the euro zone debt crisis could push the single currency towards lifetime lows around A$1.2124 and NZ$1.5575 set early in the year.
The kiwi gains came despite data showing a drop in business confidence and inflation expectations, which only added to the outlook for prolonged low interest rates in New Zealand.
"We're in a bit of a wait-and-see mode, which keeps pressure off the RBNZ to have to do something," said Bank of New Zealand economist Craig Ebert.
The central bank left its key rate steady at a record low 2.5 percent earlier this month and is expected to hold it there until next year.
The weak domestic outlook and an uncertain future for the euro would likely cap the kiwi around $0.8020, the high on May 2, and support around $0.7810.
The Antipodean currencies were steady on the yen, with the Aussie buying 80.33, and the kiwi fetching 63.15 as investors focused on brewing political rift within the Japanese ruling party over sales tax increase.
New Zealand government bonds were flat on the day, although the latest auction for 2019 and 2023 bonds drew strong interest.
Australian government bond futures were also subdued with the three-year contract flat at 97.670 and the 10-year up just 0.005 points at 97.040.
