The Australian and New Zealand dollars bounced off the canvas on Tuesday as signs US and Chinese officials were still talking on trade helped soften the body blow of UK Brexit chaos. Sentiment improved just marginally after China's Commerce Ministry said Vice Premier Liu He spoke on Tuesday with US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer.
The discussion on pushing forward the next stage of trade talks came as a welcome salve after the arrest of a top executive at Chinese telecoms giant Huawei Technologies had threatened to scupper the process. The glimmer of hope was enough to lift the Aussie dollar up to $0.7200 and off a four-week low of $0.7170.
Resistance was still lined up at $0.7227, with major chart support at $0.7164 where a breach would open the way for a retreat back toward the $0.7020/50 zone. The kiwi dollar edged ahead to $0.6882, having found solid support around $0.6840. It faces resistance at $0.6904. The pound also lost ground on the Aussie to hit A$1.7443, having fallen 1.2 percent overnight. All this tumult kept Australia's top-rated sovereign bonds well supported. Yields on 10-year paper held at 2.445 percent and near the lowest since June 2017, having fallen 40 basis points in just the past month. Futures were a whisker off their highs, with the three-year bond contract down one tick at 98.055. The 10-year contract eased 0.75 ticks to 97.5475. Yields on New Zealand 10-year paper were just above their lowest since late 2016 at 2.46 per cent.
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