The Australian and New Zealand dollars held within recent ranges on Monday as investors tried to gauge whether a simmering tariff spat between the United States and China had the potential of exploding into a full-blown trade war. The Australian dollar was 0.2 percent firmer at $0.7691, within a $0.7643-$0.7727 trading band that has held since late March.
The New Zealand dollar rose 0.2 percent to $0.7290 to sit slightly above Friday's low of $0.7244. Investors have been left to review a feast of news reports on trade after US President Donald Trump threatened further tariffs on Chinese imports last Thursday. In response, Beijing warned it was fully prepared to retaliate with a "fierce counter strike".
But there were also seemingly positive headlines with U.S officials hoping the dispute could be resolved through talks and Trump predicting China would take down its trade barriers. In contrast, the Aussie has dipped each week since March 9. New Zealand government bonds gained, sending yields 1.5 basis points lower along most of the curve.
Australian government bond futures were mixed, with the three-year bond contract unchanged at 97.830. The 10-year contract dipped 1 tick to 97.32. "While an outright US-China trade war is not on the cards yet the war of words is definitely on and it is likely to keep markets on edge over the coming weeks and potentially months," said Rodrigo Catril, Sydney-based senior forex strategist at NAB.
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