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Australia, NZ dollars get trade reprieve, likely to be brief

Published 13/07/2018, 01:39 pm
© Reuters.  Australia, NZ dollars get trade reprieve, likely to be brief
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By Wayne Cole and Charlotte Greenfield

SYDNEY/WELLINGTON, July 13 (Reuters) - The Australian and New Zealand dollars were enjoying a much-needed bounce on Friday, courtesy of a lull in the Sino-U.S. trade tussle and a sharp reversal in the formerly safe-haven yen.

The latest trade figures from China were mixed but suggested the threat of tariffs had not had a big impact as yet with exports beating forecasts in June. Aussie dollar AUD=D3 clawed its way up to $0.7415, from a $0.7360 low on Thursday, and was aiming to end a rough week with only a marginal loss.

Days of seesaw trading has left clear boundaries at the recent trough of $0.7311 and the top of $0.7484.

It got a hand up against the yen with investors seemingly seeing it as less of a safe harbour when it comes to possible trade wars given Japan's heavy reliance on exports.

Dealers said there was talk Japanese funds were investing more offshore and not hedging the currency risk as they normally do, leading to net selling of yen.

The Aussie hit a one-month high at 83.60 yen AUDJPY= , taking it well away from the recent trough at 80.58. It now faces major resistance around 84.50, which marks a triple top from March, May and June.

"Markets found some relief overnight on a lack of trade escalation and perceptions that China is taking a slightly more conciliatory tone," said analysts at ANZ in a note.

"But the China-U.S. trade dynamics are proving very difficult to read, and defensive positioning in AUD should remain in focus until clear policies emerge from both countries."

The New Zealand dollar was hovering at $0.6778 NZD=D3 , after finding some support around $0.6748 overnight. That still left it down 0.9 percent for the week.

A local survey of manufacturing showed activity slipped to a six-month low in June, the latest in a spate of soft economic releases. next major domestic event is second quarter consumer price data due on Tuesday.

Economists on average expect annual inflation to pick up to 1.6 percent, according to a Reuters poll, from a very low 1.1 percent the previous quarter.

That would still leave it short of the midpoint of the Reserve Bank of New Zealand's 1 to 3 percent target band, suggesting there was little chance of a hike in interest rates for some time to come.

New Zealand government bonds 0#NZTSY= gained, sending yields 0.7 basis points lower towards the long end of the curve.

Australian government bond futures were little changed, with the three-year bond contract YTTc1 off 1 tick at 97.925 and the 10-year contract YTCc1 steady at 97.3650. (Editing by Jacqueline Wong)

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