Australian dollar boosted by risk rally, kiwi climbs on solid data

[SYDNEY] The Australian dollar started the week on a firm footing, helped by improved risk sentiment across Asian markets on hopes the United States and China will soon resolve their trade war, while the New Zealand currency was boosted by solid economic data.

Supporting broader sentiment in the region on Monday were comments by U.S. President Donald Trump that he would delay a planned tariff increase on Chinese imports and that he was looking forward to a meeting with Xi Jinping once a deal is hammered out.

The Australian dollar, a liquid proxy for Chinese growth, added 0.3 per cent to US$0.7146, drifting away from a 10-day trough of US$0.7070 hit last week on reports a Chinese port has banned Australian coal imports.

The scare abated as several officials from China and Australia separately came out to deny the report, saying there were delays as Chinese customs authorities had stepped up safety checks on foreign cargoes.

Also helping the Aussie, prices of Australia's biggest export earners - iron ore and coal - rose, while copper, a barometer of global growth, jumped to a seven-month top.

The gains came as market focus shifted squarely to US-Sino trade talks with Mr Trump tweeting progress had been made on intellectual property, technology transfers, agriculture, services and currencies.

"Even as we wait for details of the agreement, the anxiety is likely to ease and encourage bullish risk exposure in general," Citi analysts said in a note.

The trade war has been a psychological obstacle for financial market sentiment since last year, weighing on risk assets and fueling fears of a global economic slowdown.

The New Zealand dollar added 0.4 per cent to US$0.6865 as data showed the country's retail sales jumped last quarter, tempering concerns about softer economic growth.

New Zealand retail sales volumes rose 1.7 per cent in the fourth quarter, a sharp pick up from the 0.3 per cent growth seen in the previous three-month period.

"It suggests that... Q4 production GDP will be quite solid," said Christina Leung, principal economist at the New Zealand Institute of Economic Research (NZIER). "It suggests that there's still a bit of momentum in the New Zealand economy in the final quarter of last year."

The solid data led a sell-off in government bonds, sending yields about two to four basis points on the short-end and five basis points higher on the long end of the curve.

Australian government bond futures were mixed, with the three-year bond contract easing one tick to 98.35. The 10-year contract added 2.5 ticks to 97.93.


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