By Swati Pandey and Charlotte Greenfield
SYDNEY/WELLINGTON, Nov 3 (Reuters) - The Australian dollar treaded water on Thursday as a tightening U.S. presidential race rattled financial markets globally, although its New Zealand counterpart rose to a one-month peak.
The Australian dollar AUD=D4 was up 0.03 percent at $0.7661, after touching a high of $0.7683 earlier in the day.
The election has dominated market sentiment recently after many national polls showed Democrat Hillary Clinton's lead over Republican Donald Trump had narrowed. view Clinton as the candidate of status quo while there is a high degree of uncertainty about what Trump might do if he became leader of the world's biggest economy.
"The U.S. election is certainly weighing on risk sentiment and distorting the landscape," said Stephen Innes, senior currency trader at OANDA Australia and Asia Pacific.
"I anticipate the street to remain very light on outright U.S. dollar risk from now through the election day."
Earlier in the day, the Aussie got some support from data showing the trade deficit shrank to the lowest in 20 months in September as coal exports surged. estimate a sharp rebound in prices of coal and iron ore, Australia's two biggest exports, will help wipe out the trade deficit.
"If these prices are sustained, there is an increasing prospect of a trade surplus and even larger boost to nominal gross domestic product, which is a support to the AUD," said George Tharenou, an economist at UBS.
The Aussie underperformed the yen AUDJPY= as traders drove to safer assets amid rising uncertainty ahead of the U.S. elections.
It skidded to a more than one-month-low against its New Zealand cousin AUDNZD=R .
The Aussie fell 1.3 percent on Wednesday, its largest decline in almost four months, after New Zealand reported stronger-than-expected jobs data and a sustained tick-up in dairy prices.
The New Zealand dollar NZD=D4 also hovered near one-month highs on the U.S. dollar at $0.7308, having enjoyed its largest daily rise in almost two months the previous session.
International milk prices rose 11.4 percent in this week's fortnightly auction while employment data showed impressive jobs creation, adding to positive momentum. from NZ has been stronger. We still expect the RBNZ to ease at their next meeting, but the odds of a further easing bias have been greatly reduced," said Matt Simpson, senior analyst at ThinkMarkets.
New Zealand government bonds 0#NZTSY= gained, sending yields 2.5 basis points lower at the long end of the curve.
Australian government bond futures rose, with the three-year bond contract YTTc1 up 2 ticks at 98.34. The 10-year contract YTCc1 added 5 ticks to 97.73. (Editing by Kim Coghill)