The Australian and New Zealand dollars reversed early losses on Tuesday on a media report that China's top trade war negotiator was heading to the United States to prepare for talks between the two countries' leaders.
The Sino-U.S. trade war has been a major overhang for financial markets this year as investors fear global protectionism will hurt China's economy as well as world growth.
Tuesday's source-based report in Hong Kong's South China Morning Post was perceived as positive by market players and lifted the Australian dollar AUD=D4 from the day's low.
The currency, often played as a liquid proxy for Chinese assets, was last up 0.5 percent at $0.7213. The Aussie has stumbled about 8 percent so far in 2018.
"This is good news, so we have seen a broad improvement in sentiment across market," Rodrigo Catril, Sydney-based senior forex strategist at National Australia Bank, told Reuters.
"But there is still some caution. We obviously need more detail on it. This should also be taken in the context of new retaliatory measures that the U.S. is considering against China."
Earlier, the Wall Street Journal reported, citing sources, that the Trump administration is broadening its China trade battle beyond tariffs with a plan to use export controls, indictments and other tools to counter the theft of intellectual property.
Earlier in the day, a survey showed that Australia's business conditions and confidence declined in October, driven by a slowdown in firms' intention to hire more workers.
Investors are next focussed on wage data due on Wednesday that is likely to show an uptick in third-quarter.
The New Zealand dollar NZD=D4 also got a lift from the media report saying Liu will visit Washington. The currency was last up 0.5 percent at $0.6744, not far from a recent three-month top of $0.6820.
The kiwi has held on to last week's gains as investors continued to see a falling chance of a rate cut following surprisingly strong third-quarter labour data last week.
The Reserve Bank of New Zealand (RBNZ) has shifted to a neutral tone after earlier indicating rates could go down if economic data disappointed.
Economic activity has, in fact, surprised on the upside in recent months, with the jobless rate plunging to 10-year lows.
"The resilience of the NZD is probably explained by further unwinding of NZD short positions as the market continues to recalibrate its RBNZ expectations in the wake of the exceptionally strong NZ employment report," Catril said in a note earlier.
