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Australia, NZ dollars enjoy relief rally on Xi comment
[SYDNEY] The Australian and New Zealand dollars popped higher on Tuesday as investors wagered conciliatory-sounding comments from Chinese President Xi Jinping could lessen the risk of a trade war with the United States.
The Aussie dollar rose around a third of a cent on a firm US dollar to reach $0.7738, its highest in two weeks.
The major gains came on the crosses, where it climbed 0.8 per cent on the safe-haven yen to a three-week top of 82.94 . The euro also lost 0.5 per cent to A$1.5925.
The kiwi dollar rose around 0.7 per cent to US$0.7330, its highest in almost a month.
The gains came after Mr Xi used a keynote speech to repeat a long-standing pledge to open China's markets and allow more foreign investment in the Asian giant. He also defended free trade and promised to reduce import tariffs.
Dealers said investors were just relieved Mr Xi did not ramp up the rhetorical war with US President Donald Trump over trade.
"President Xi has ignited a rally in risk assets that might have some legs if the US can keep a lid on the protectionist rhetoric for a while," said Sean Callow, a senior forex analyst at Westpac.
He noted there must have been considerable nerves about the speech in markets given the outside reaction to what were largely boiler-plate pledges to abide by the global rules-based order.
"There is always scope for scepticism over words versus actions but it seems that at least for now, the weight of money is against the cynics," added Mr Callow.
Australia and New Zealand have a lot to lose from global trade tensions given they are commodity-producing, export-heavy countries highly leveraged to world growth.
China is also Australia's largest single export market and the Aussie is often used as a liquid proxy by investors expressing views on the country's outlook.
Domestic data was overshadowed but showed Australian business conditions eased back from record highs in March.
A similar survey in New Zealand showed confidence stayed in the negative in the first quarter, though demand for firms'services was robust.
Australian government bond futures were little changed, with all the action in currencies. The three-year bond contract dipped one tick to 97.825, while the 10-year contract fell 1.5 ticks to 97.3000.
New Zealand government bonds eased a touch, lifting yields a basis point across the curve.