Australian, NZ dollars hit 10-week peaks as US dollar stumbles

[SYDNEY] The Australian and New Zealand dollars touched 2-1/2 month highs on Tuesday as the greenback wallowed on concerns about the impact of US President Donald Trump's protectionist trade stance.

Mr Trump formally withdrew the United States from the Trans-Pacific Partnership trade deal on Monday, distancing America from its Asian allies even as China's influence in the region rises.

The Australian dollar rose as far as US$0.7609, a level last seen on Nov 11. The New Zealand dollar climbed to peak of US$0.7265, from as low as US$0.7165 on Monday.

"The US dollar market remains very nervous, not only driven by Mr Trump's uncertainties, but very unsure of what additional daunting headlines may lie ahead," said Stephen Innes, senior currency trader at FX and CFD provider OANDA Australia and Asia Pacific.

Investors had been looking to Mr Trump to highlight his plans for fiscal spending, tax cuts and regulatory reforms at his various public addresses in recent days, but he has instead focussed on his "America first" campaign catchphrases.

That uncertainty has pushed the greenback to near seven-week lows. The Aussie, on the other hand, is up 5.4 per cent so far in January and among the best performing major currencies this year.

Locally, attention will veer to inflation data due on Wednesday. Analysts believe CPI picked up a little, but core inflation remained around a record low of 1.5 per cent for a second straight quarter.

New Zealand also releases inflation data on Thursday which would be closely watched for confirmation that the consumer price index had returned to the central bank's target range.

The Aussie's golden run against the US dollar did not extend to other currencies.

It slipped against its New Zealand cousin and was set for its third straight monthly fall. Against the yen , it lost 1.2 per cent on Monday to post its worst one-day performance since Dec 19.

It did bounce 0.3 per cent against the euro, but fell for a third straight session on the British pound.

New Zealand government bonds gained, sending yields 0.5 basis points lower at the long end of the curve.

Australian government bond futures followed Treasuries higher, with the three-year bond contract up 3 ticks at 97.99. The 10-year contract added 4.5 ticks to 97.255.

REUTERS