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Australia, NZ dollars near 5-month top as global mood brightens

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The Australian and New Zealand dollars held near five-month peaks on Monday as hopes for progress in the Sino-US trade standoff lifted risk assets and commodity prices.

[SYDNEY] The Australian and New Zealand dollars held near five-month peaks on Monday as hopes for progress in the Sino-US trade standoff lifted risk assets and commodity prices.

The Aussie stood at US$0.6986, having climbed 1.1 per cent last week to approach the US$0.70 level for the first time since July. It was still down about 0.9 per cent on the year so far, but well up from a decade low of US$0.667 touched in October.

The currency also cleared a major technical barrier by breaking and holding above the 200-day moving average of US$0.6900 for six straight sessions, the longest such stretch since early 2018.

The kiwi dollar was firm at US$0.6710, having topped 67 cents for the first time since July. That left it almost back where it started the year, having been as low as US$0.6204 at one stage in October.

The currency has been on a roll in recent weeks as domestic economic data proved surprisingly upbeat and investors scaled back expectations for more rate cuts from the Reserve Bank of New Zealand (RBNZ).

Markets imply only a minor chance of a move from one per cent at the next policy meeting in February and have just eight basis points of easing priced in for the entire year.

The run of data has not been nearly as favourable in Australia, with consumer spending particularly disappointing despite tax breaks and rising home values.

Futures thus imply around a 32 per cent chance of a quarter-point cut in the 0.75 per cent cash rate from the Reserve Bank of Australia (RBA) at its next policy meeting in February, and have 21 basis points of easing priced in for 2020.

Markets had been wagering on even more but pulled back as the United States and China finally made progress in their protracted trade dispute, lessening one major threat to global growth.

Both the Aussie and kiwi jumped late last week after US President Donald Trump said he and Chinese President Xi Jinping would have a ceremony to sign the Phase 1 deal.

The improvement in risk appetite has triggered a retreat in Australian bond futures, with the three-year bond contract hitting its lowest in more than six weeks at 99.085 before paring the losses to 99.130.

The 10-year bond contract was near its lowest since July at 98.6900, some way from the all-time peak of 99.1700 scored in August. That was still far above where it started this year at 97.6800. 

REUTERS