SYDNEY/WELLINGTON, Sept 27 (Reuters) - The Australian dollar bounced from early losses on Tuesday as investors seemed to judge Democrat Hillary Clinton as the winner of the first U.S. presidential debate against Republican Donald Trump.
The Australian dollar AUD=D4 was down about 0.2 percent before the debate began but turned around to be up 0.33 percent at $0.7660 after it ended. The Aussie is set to close the month in the black, after falling more than 1 percent in August.
"The market has decided that the odds of Trump being victorious has receded slightly. The debate hasn't done anything to further improve his chances," said Ray Attrill, Global Co-Head of FX Strategy at National Australia Bank.
"Given that the market seemed to have made that judgement, risk sentiment now seems to be reflecting in a firmer Aussie dollar," he added.
Markets have tended to see Clinton as the candidate of the status quo, while few are sure what a Trump presidency might mean for U.S. foreign policy, trade and the domestic economy. polls have shown the two candidates in a very tight race, with the latest Reuters/Ipsos polling showing Clinton ahead by 4 percentage points, with 41 percent of likely voters.
When risk appetite is high, the Aussie is favoured as a carry currency with investors borrowing at low rates in yen or euros to buy higher yielding Australian assets.
In a sign of fading risk aversion, the U.S. dollar edged up against a basket of currencies .DXY while the euro was steady.
The greenback sank 1.9 percent on the peso MXN=D2 , lifting the peso from an all-time trough hit in recent days on concerns that a Trump presidency would threaten Mexico's exports to the United States, its single biggest market.
The New Zealand dollar NZD=D4 gained too, rising 0.3 percent after hitting a one-month low on Monday.
The kiwi has fallen over the last two weeks mainly on expectations for interest rates to fall further and on a general uptick in global risk-aversion.
Still, the kiwi is one of the best performing major currencies this year, up nearly 7 percent.
New Zealand government bonds 0#NZTSY= gained, sending yields 1.5 basis points lower at the long end of the curve.
Australian government bond futures were mixed, with the three-year bond contract YTTc1 off 1 tick at 98.44. The 10-year contract YTCc1 rose 1.5 ticks to 98.035.