Australia dollar camps near 3-week peak, NZ dollar lags

[SYDNEY] The Australian dollar steadied near three-week highs on Wednesday as a pick-up in global risk sentiment delivered a third day of gains, while its New Zealand cousin still struggled near one-month lows.

The Australian dollar held at US$0.7671, swinging between gains and losses, after once again failing to breach 77 US cents - a crucial chart resistance.

It added 0.4 per cent on Tuesday, its biggest daily percentage gain in a week, as markets judged Democrat Hillary Clinton the winner of the first US presidential debate with Republican Donald Trump.

"The 77 cents level is still a bridge too far," said Greg McKenna, chief market analyst at brokerage AxiTrader.

The Aussie has breached that barrier several times in the past few months but fell back each time.

"But the persistence of the Aussie's strength speaks volumes about the underlying support it has in the current global environment, which is conducive to further gains," Mr McKenna added.

After weakening in August, the Aussie is on track to end this month higher. When risk appetite rises, the Aussie is favoured as a carry currency with investors borrowing at low rates in yen or euros to buy higher yielding Australian assets.

It is also faring better against the New Zealand dollar and is set for its biggest monthly gain since March. The cross gained 0.3 per cent on Wednesday.

The Aussie was steady against the euro and inched higher against the yen Against the greenback, the New Zealand dollar fell 0.2 per cent to US$0.7288 on Wednesday, after two straight gains that helped it off a one-month low of US$0.7221 earlier this week.

New Zealand's relatively high yields are still supporting the currency, which has been on the rise since late May when it formed a trough around US$0.6676.

"NZD/USD and NZD/AUD support is evident in price action, with both bouncing off lows nicely, maintaining the uptrend," said David Croy, senior rates strategist at ANZ.

New Zealand government bonds gained, sending yields five basis points lower at the long end of the curve.

Australian government bond futures were higher too, with the three-year bond contract up two ticks at 98.46. The 10-year contract rose 2.5 ticks to 98.045.

REUTERS