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Australia, NZ dollars tread water in cautious trading


[SYDNEY] The Australian dollar paused near three-week highs on Thursday and its New Zealand cousin was a shade firmer, but trading was cautious on worries a tariff dispute between the United States and China was far from getting resolved.

A senior Chinese official said on Thursday Beijing will not hesitate to fight back if the United States escalates trade tensions, warning that Chinese President Xi Jinping's pledge to cut import tariffs is not a concession to Washington.

The Australian dollar eased 0.1 per cent to US$0.7753 from a three-week high of US$0.7772 touched earlier in the day.

Earlier this week, investors took some solace from Mr Xi's pledge to open China's economy further and lower import duties on goods such as cars.

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US President Donald Trump responded in a tweet saying he was "thankful" for Mr Xi's kind words on tariffs and access for US automakers, as well as his "enlightenment" on intellectual property issues.

The conciliatory language boosted risk appetite, sending the Aussie to a three-week high and the kiwi to a near two-month top.

But commerce ministry spokesman Gao Feng said at a regular press briefing in Beijing it would be misleading to say Mr Xi's pledge this week was a concession to the United States.

Still, many investors feel a global dispute over trade will be averted.

"So far there is only a 'phoney trade war' between the US and China as major tariffs are only 'proposed'," said Shane Oliver, Sydney-based chief economist at AMP.

"President Trump's actions on trade are mainly aimed at achieving better access for US exports to China and better treatment of US intellectual property by China," Mr Oliver said.

"They are not primarily aimed at traditional US allies, reducing the risk of a global trade war."

In New Zealand, the kiwi dollar was up 0.1 per cent at US$0.7368, not far from Wednesday's peak of US$0.7378 and key resistance at US$0.7440.

The kiwi was helped by robust electronic retail card spending which rose 6 per cent in March from a year earlier, almost doubling from the previous month, a sign of strong consumer spending.

Separately, a senior central bank official reiterated the Reserve Bank of New Zealand's (RBNZ) new mandate would not materially change policy direction.

The market was generally worried the RBNZ could turn dovish following the addition of an employment goal to its mandate. The central bank has left rates at record lows since November 2016 despite booming employment in a growing economy.

New Zealand government bonds eased, sending yields two basis points higher at the short end of the curve.

Australian government bond futures were flat, with the three-year bond contract at 97.829 and the 10-year contract at 97.31.