The Australian and New Zealand dollars held gains on their U.S. counterpart on Tuesday as a breakthrough in U.S.-Mexico trade talks removed one potential risk to the global outlook, though there was no progress of note with China.
The Aussie dollar AUD=D3 stood at $0.7337, well above last week's trough of $0.7238. A breach of chart resistance at $0.7333 improved the technical outlook but a tougher barrier lies at a former rally top at $0.7381.
The kiwi dollar NZD=D3 hovered at $0.6695, up from a low of $0.6620 touched on Friday. Resistance lies around $0.6720.
The United States and Mexico agreed a trade deal on Monday in what is essentially a re-branding of the North American Free Trade Agreement. Canada's trade minister will be in Washington Tuesday for their own talks.
Auto stocks climbed and the S&P 500 struck record highs on hopes the agreement would ease the economic uncertainty caused by U.S. President Donald Trump's repeated threats to dump the 1994 accord.
That was a relief to trade-exposed currencies and to global commodity prices, and thus a double boon to the Aussie and kiwi.
The mood swing was most apparent against the safe-haven yen. The Aussie reached 81.64 AUDJPY= having been down at 79.66 a couple of weeks ago, the lowest since November 2016.
Yet there was scant sign of any progress between the United States and China with talks last week proving fruitless and no more scheduled for the moment.
"It is hard to extrapolate much out of the Mexico deal as the U.S. continues to treat each country and deal on its own merit," said analysts at ANZ in a note.
"We remain wary of the current rally in risk appetite, and see it as short-lived."
For now, Australian government bonds eased in line with Treasuries with the three-year bond contract YTTc1 off 2 ticks at 97.935. The 10-year contract YTCc1 fell 4 ticks to 97.4200.
Australia currently pays 27 basis points less than the U.S. to borrow money for 10 years AU10YT=RR . The last time it enjoyed a discount like that was in 1981.
New Zealand government bonds
0#NZTSY= eased, sending yields 2.5 basis points higher at the long end of the curve.(([email protected]; 612 9321 8162; Reuters Messaging: [email protected]))
