By Wayne Cole
SYDNEY, Oct 22 (Reuters) - The Australian and New Zealand dollars extended a week-long rally on Tuesday as optimism for progress on Sino-U.S. trade talks and the Brexit standoff squeeze short positions and pushed bond yields higher.
The Aussie dollar AUD=D3 reached a five-week top of $0.6883, though bulls need to break major resistance at the September peak of $0.6895 to build on the run.
The kiwi dollar NZD=D3 was in much the same position having climbed to the highest in more than five weeks at $0.6435 and nearing the September top of $0.6450.
"Positive mood music on U.S.-China trade developments is keeping the risk fires burning, the S&P 500 closing back above 3,000 for the first time since September 19th and bond yields higher across the globe," said Ray Attrill, head of FX strategy at NAB.
China and the United States have achieved some progress in their trade talks, Vice Foreign Minister Le Yucheng said on Tuesday, adding that as long as both sides respected each other, no problem could not be resolved. President Donald Trump also sounded upbeat on a China deal on Monday, while White House adviser Larry Kudlow said tariffs on Chinese goods scheduled for December could be withdrawn if talks go well. Brexit, investors are wagering Prime Minister Boris Johnson's repeated failures to get his deal through Parliament mean there is less of a risk of a hard exit. of which has seen safe-haven bonds cede some of the year's huge gains. Yields on Australian 10-year paper AU10YT=RR were up at 1.18%, after being as low as 0.87% just eight sessions ago.
Three-year bond futures YTTc1 eased 1.5 ticks to 99.210, and further away from the recent record peak of 99.420.
Yields on New Zealand 10-year bonds NZ10YT=RR rose to 1.35%, a long way from the recent trough of 1.01%.
There were no economic data out, but dairy exporter Fonterra FCG.NZ FSF.NZ lifted the 2019-2020 guidance range for the price it pays farmers for milk, saying it has managed to achieve firm prices so far this year. company estimated the increase would add NZ$450 million to New Zealand's economy. (Editing by Shri Navaratnam)