The Australian and New Zealand dollars consolidated gains on Tuesday as signs of progress in the Sino-US trade dispute were taken as a positive for the Chinese economy and commodity prices.
The Aussie dollar hovered at $0.7164, having stretched as high as $0.7184 overnight. Dealers noted there were very large option positions due to expire between $0.7150 and $0.7200 which would tend to trap the currency in that range.
The kiwi dollar was firm at $0.6880 after touching a three-week top of $0.6902. Major resistance now comes in around $0.6942, with immediate support at $0.6864.
Australian government bond futures dipped as risk sentiment improved, with the three-year bond contract off 1 tick at 98.330. The 10-year contract fell 2 ticks to 97.8950.
Yields on New Zealand government bonds edged up around 1 basis point across the curve.
US President Donald Trump said on Monday he may soon sign a deal to end a trade war with Chinese President Xi Jinping if their countries can bridge remaining differences, saying negotiators were "very, very close" to a deal.
Markets rallied after Trump said on Sunday he would delay an increase in US tariffs on $200 billion of Chinese goods.
The trade news combined with expectations of more policy stimulus from Beijing to set off a huge rally in Chinese shares on Monday, with Shanghai blue chips climbing almost 6 percent.
Commodities also benefited, with copper hitting its highest in nearly eight months. The industrial metal is considered a bellwether for global activity and has acted as a leading indicator for the Aussie in the past.
"Buoyant risk appetite and commodity prices are currently more than offsetting the domestic concerns over a subdued consumer, declining house prices and a cautious Reserve Bank," said Rodrigo Catril, a senior FX strategist at National Australia Bank.
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