The Australian and New Zealand dollars consolidated recent gains on Tuesday as investors waited anxiously to hear if any real progress was being made at Sino-U.S. trade talks in Beijing.
U.S. Commerce Secretary Wilbur Ross predicted on Monday that Beijing and Washington could reach a trade deal that "we can live with" as dozens of officials resumed talks.
Markets had been encouraged at the surprise appearance of Chinese Vice Premier Liu He at the meetings.
"The talks were supposed to be between mid-tier bureaucrats, so the appearance of one of China's most senior officials signalled China's eagerness to end the trade war," said Marshall Gittler, chief strategist at ACLS Global.
"We could have a breakthrough, leading to a rally in the Aussie and kiwi."
The Aussie dollar AUD=D3 was taking a breather at $0.7134 after running out of puff at $0.7150 resistance, though that remained a world away from last week's "flash crash" low of $0.6715. The next chart targets are $0.7205 and $0.7250.
The kiwi dollar NZD=D3 had likewise paused at $0.6745 and faces stiff resistance around $0.6690.
Domestic data out Tuesday showed Australia's trade surplus dipped a little more than expected to A$1.93 billion ($1.38 billion) in November.
The miss was largely because imports of capital and consumer goods enjoyed a second month of surprising strength, suggesting domestic demand was holding up.
Exports to China also hit a record high at A$11.1 billion, a rise of almost 41 percent from a year earlier and evidence the Sino-U.S. trade dispute had yet to bite.
"But trade tensions are occurring at a time when the growth outlook is softening in both economies," noted CBA economist Belinda Allen. "The outlook for China is crucial given 36 percent of Australia's exports go there."
It was promising, then, that Chinese iron ore prices had just climbed to a 10-week peak on talk of restocking demand at steel mills. The ore is Australia's single biggest export earner to China.
In local bond markets, futures had stabilised after a huge rally in recent weeks. The three-year bond contract YTTc1 edged off 3.5 ticks to 98.195, having hit its highest since late 2016 last week.
The 10-year contract YTCc1 dipped 4.5 ticks to 97.6850, but is still up almost 50 ticks from early November.
($1 = 1.4017 Australian dollars)
