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Australia, NZ dollars firm as markets try to regain composure

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The Australian and New Zealand dollars enjoyed a short-covering rally on Tuesday as the market tried to find some equilibrium after last week's massive jolt when Britain voted to leave the European Union.

[SYDNEY] The Australian and New Zealand dollars enjoyed a short-covering rally on Tuesday as the market tried to find some equilibrium after last week's massive jolt when Britain voted to leave the European Union.

The Australian dollar was back flirting with 74 US cents, up nearly one per cent on the day. It rose by roughly the same magnitude against the yen to 75.38.

Likewise, its New Zealand peer climbed to US$0.7049, pulling further away from Friday's trough of US$0.6975. The kiwi was just shy of 72.00 yen, up 0.7 per cent on the day.

"The absence of fresh fodder to push forward the Brexit narrative may offer shell-shocked markets a bit of space for digestion," noted Ilya Spivak, currency strategist at FXCM.

"Indeed, the pound is already on the upswing alongside commodity-bloc currencies and share prices in Asian trade while the yen and US dollar decline."

Sterling was steadier after its eye-watering 11 per cent slide in the past two sessions. The pound gained 0.7 per cent to US$1.3308, climbing from a 31-year trough of US$1.3122 set overnight.

Traders said investors were perhaps counting on leaders at an EU Summit and central bankers at a European Central Bank forum to reassure markets later in the day.

New Zealand government bonds were a tad firmer, along with Australian government bond futures. The three-year bond contract edged up three ticks to 98.540.

Yields on 10-year Australian bonds touched a fresh record low around 1.96 per cent in early trade, before edging back to 1.99 per cent. It was as high as 2.35 per cent at one stage on Friday.

REUTERS