News: Australian, NZ dollars climb on Sino-U.S. trade optimism, bonds sell-off

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    The Australian dollar climbed to a two-week high on Friday, while its New Zealand cousin was also upbeat as risk appetite was whetted by expectations of a trade deal between the United States and China.

    The Australian dollar AUD=D4 hit a day's high of $0.6782, a level not seen since late-September. It was up 0.3% at $0.67795, as of 0401 GMT.

    The New Zealand dollar NZD=D4 was up 0.1% at $0.6324. Both the currencies were headed for their third straight weekly rise though the gains were likely to be miniscule.

    Market sentiment turned positive after a first day of trade talks between top U.S. and Chinese negotiators that U.S. President Donald Trump characterised as "very, very good."

    A White House official said the talks had gone "probably better than expected" and a U.S. Chamber of Commerce official briefed by both sides raised the possibility of a currency agreement this week.

    The broader improvement in risk sentiment led to a sell-off in bonds with yields on New Zealand government notes 0#NZTSY= rising about 6-9 basis points at the short-end of the curve.

    Three-year Australian bond contract YTTc1 slid 9 ticks to a 1-1/2-week trough of 99.34. The 10-year contract YTCc1 dipped 1.25 ticks to 98.9850.

    Despite the trade optimism, analysts broadly expect the antipodean currencies to remain under pressure.

    "Easier central bank policy has effectively removed the last vestiges of hope for AUD & NZD as these currencies succumb to the USD carry king," said Mazen Issa, senior forex strategist, TD Securities.

    In the absence of "an appreciable and sustained positive global macro impulse, these currencies will continue to languish in FX purgatory."

    In Australia, investor attention will be on official employment data for September due on Thursday that is likely to show the jobless rate stayed stuck at a one-year high of 5.3% despite three interest rate cuts by the country's central bank.

    The employment report has become a critical indicator for the Reserve Bank of Australia (RBA), which is counting on continued job strength to help reduce the spare capacity in the country's labour market.

    Financial futures 0#YIB: are pricing in a 50-50 chance of a fourth rate cut to 0.5% next month.

    In New Zealand, data on retail sales out on Friday showed electronic card spending rose 0.4% in September, double the market expectations but slower than a solid 1.2% in August.

    "Consumers checked their spending habits in September," said ASB economist Mike Jones.

    "Looking ahead, a pick-up in housing market activity, falling mortgage rates, and fiscal cash will help support retail spending."

 
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