Australia, NZ dollars inch higher as Trump sticks with Nafta

[SYDNEY] The Australian and New Zealand dollars rose on Thursday from multi-month lows in a relief rally after US President Donald Trump pulled back from a threat to kill the North American Free Trade Agreement (Nafta).

Senior White House officials had said earlier that Mr Trump was considering an executive order to withdraw the United States from the long-standing deal, a move that could unravel one of the world's biggest trading blocs.

Commodity-led currencies, such as the Australian dollar, could be badly hit by any measures in global trade deemed protectionist.

The Australian dollar rose modestly in Asian hours after the White House said Mr Trump had agreed not to terminate the Nafta agreement for now.

The Aussie was last up 0.17 per cent at US$0.7483, not far from its lowest point in more than three months of US$0.7455 on Wednesday.

The New Zealand dollar rose 0.3 per cent to US$0.6909, up from a four-month low of US$0.6873 on Wednesday.

"In the near term it is a positive, but I think it highlights another failure in terms of fulfilment of pre-election promises by the Trump administration," said Rodrigo Catril, currency strategist at NAB.

"It will be interesting to see how the market takes it in the long-run. It also means that dark clouds hovering over commodity currencies won't go away very quickly."

The market will watch for a speech later in the day by Reserve Bank of Australia (RBA) governor Philip Lowe for any clues about the monetary policy outlook.

The Aussie took a beating on Wednesday after consumer price data reinforced expectations the RBA will stay its hand on interest rates in the near-term after easing twice last year. The RBA holds its next policy meeting on May 2.

Key measures of core inflation stayed stubbornly short of the RBA's 2-to-3 per cent target band last quarter.

Yields on New Zealand government bonds fell two basis points at the short-end of the curve and about four basis points at the long end.

Australian government bond futures climbed, with the three-year bond contract up two ticks at 98.140. The 10-year contract added 2.5 ticks to 97.365.

REUTERS