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Australia, NZ dollars gain on pound after blast in UK, May's poll setback

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[SYDNEY] The Australian and New Zealand dollars inched higher against the British pound following a suspected terrorist attack at a pop concert in Manchester that killed at least 19 people and wounded more than 50, raising security concerns just 2-1/2 weeks before an election in Britain.

The pound had come under pressure overnight after opinion polls showed that Prime Minister Theresa May's lead had been halved going into an vote that she had been expected to win easily.

If police confirm that the explosion in Manchester was a terrorist act, it would be the deadliest militant assault on Britain since suicide bombings on London's transport system in July 2005.

The pound skidded 0.33 per cent to a three-week trough of A$1.7321 against the Australian dollar. It fell to a one-month low on the New Zealand dollar.

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The Aussie also did well elsewhere, climbing 0.2 per cent on the greenback for its third straight session of gains. The Australian dollar rose to a three-week peak of 75 US cents.

Matt Simpson, senior analyst at ThinkMarkets, said US dollar weakness overnight had helped put commodity currencies, like the Australian dollar, on a firmer footing.

"We may see the 75 US cents level tease some traders into profit taking. Yet a break above 75 now appears inevitable and 0.753/34 likely to provide resistance," Mr Simpson said.

Across the Tasman Sea, the New Zealand dollar gained on Tuesday, rising to an almost one-month high of US$0.7011 from as low as US$0.6917 the previous day.

"NZD outperformed... possibly in anticipation of a stimulatory NZ Budget on Thursday," said Imre Speizer, currency strategist at Westpac Bank, in a research note.

New Zealand is set to unveil a better-than-expected budget surplus this week and will target any spare cash on infrastructure and housing as the centre-right government tries to woo voters ahead of national elections this year.

New Zealand government bonds gained, sending yields 2.5 basis points lower along most of the curve.

Australian government bond futures gained, with the three-year bond contract up two ticks at 98.250. The 10-year contract added four ticks to 97.52.