* Aussie, Candian dollar better bid as Asian shares rebound
* Euro broadly lower as ECB officials sing from same dovish sheet
* Dollar higher, ignores downgrade to Q1 GDP
* Yen underpinned by data showing Japanese selling of foreign bonds
By Ian Chua
SYDNEY, June 27 (Reuters) - The Australian dollar and other commodity currencies rose modestly on Thursday as Asian shares recovered after a selloff earlier this week sparked by fears of credit problems in China, while a dovish message from European Central Bank officials kept the euro on the defensive.
The Australian dollar managed to outperform the greenback, as Asian equities showed some signs of stabilising, posting a gain of 1.6 percent.
Still some traders say concerns about a slowdown and possible credit crunch in China could keep the Aussie in check.
“There will surely by a bear market rally from time to time but I don’t think investors are eager to take risk in Asia now,” said a trader at a Japanese bank.
The currency is also partly helped by development in local politics.
A leadership change in the Labor Party saw Kevin Rudd return as Australian prime minister. Ousted Julia Gillard had struggled to win public support with opinion polls suggesting her minority government was headed for a massive defeat at this year’s general election.
With Rudd back at the helm, the hope is there would be more stability in the Labor Party, although local politics rarely have a lasting impact on markets because the major parties are considered very middle of the road in economic policy.
The Aussie dollar rose 0.4 percent to $0.9314, near a one-week high of $0.9345 while the Canadian dollar also gained 0.4 percent to C$1.0435 per U.S. dollar.
The euro was last at $1.3031, up slightly from late New York levels but still not far from a four-week low near $1.2984 plumbed on Wednesday.
Against the yen, the common currency was at 127.36 , having skidded 0.7 percent to a one-week low of 126.57 on Wednesday.
ECB President Mario Draghi, Executive Board member Yves Mersch and policymaker Christian Noyer, were all out in force on Wednesday stressing the ECB was not preparing to start winding down stimulus, in contrast to the Federal Reserve.
“The euro has shifted from being a relative outperformer to relative underperformer this week,” BNP Paribas analysts wrote in a client note.
“A number of ECB officials have been ‘on message’ in stressing that policy will remain accommodative, apparently eager to draw an implicit contrast between its stance and the Fed’s tapering message.”
Not helping the euro, two newspapers on Wednesday warned Italy faced 8 billion euros in losses on derivative contracts restructured at the height of the euro zone crisis, prompting the country’s economy minister to deny the reports.
Pressure on the euro helped the dollar index rise to 83.025 on Wednesday, a high last seen since the start of the month. It stood at 82.792, just below the 61.8 percent retracement of its May-June fall at 82.970.
Traders said month and quarter-end buying further supported the U.S. dollar, which largely shrugged off a surprisingly sharp downgrade to first quarter U.S. economic growth.
The Commerce Department said gross domestic product expanded at a 1.8 percent annual pace in the quarter, compared with a previously reported 2.4 percent pace.
Traders said the data was historical and a recent batch of encouraging reports indicated that the economy was on a gradual recovery path, keeping intact expectations for the Fed to start rolling back its stimulus later this year.
The U.S. dollar hardly budged against the yen, capped by data that showed large Japanese investors sold foreign bonds for six weeks in a row last week, in their largest net selling in 14 months.
The dollar was steady at 97.77 yen.
There is little in the way of major economic data in Asia, while Europe has a slew of reports including euro zone economic sentiment, consumer sentiment, German employment and import prices.