Australia, NZ dlrs up on yen as trade tensions ease

By Swati Pandey

SYDNEY, March 27 (Reuters) – The Australian and New Zealand dollars gained against the yen on Tuesday as fears of a U.S.-China trade war abated as reports of quiet negotiations between the two countries revived risk appetite.

The Australian dollar AUDJPY= rose for a second straight day to 81.70 yen after hitting a near 16-month trough last week.

The New Zealand dollar NZDJPY= bounced to 77.03 yen, the highest since March 16 and well above a November 2016 low of 75.54 touched on Friday.

The currencies rallied as investors hoped the world’s two biggest economies will achieve a suitable compromise on trade, despite threats of tariffs on U.S. imports by President Donald Trump.

China’s Premier Li Keqiang pledged on Monday to maintain trade negotiations and ease access to American businesses. That followed a report in the Wall Street Journal that Treasury Secretary Mnuchin was considering a visit to Beijing to begin talks. addition, a number of countries including South Korea won an exemption from Trump’s tariffs on steel and aluminium.

Investors took all this as a sign of rapprochement between China and the United States, sending equities higher and knocking off the yen, a perceived safe haven.

“Note that the trade backdrop isn’t nearly as bad as some of the headlines last week made it seem,” analysts at JP Morgan said.

“Nothing was actually implemented with regards to China – it was simply a vague threat to take action should trade negotiations fail to bear fruit,” they added.

“Several major countries and regions were granted exemptions from the steel/aluminum tariffs and a new trade deal between the U.S. and South Korea appears imminent.

Against the U.S. dollar, the antipodean currencies were a shade weaker following a sturdy rebound overnight.

The AUD=D4 held at $0.7731, down 0.25 percent and the kiwi eased 0.15 percent to $0.7287.

New Zealand government bonds 0#NZTSY= eased a tad, sending yields about half a tick higher at the long-end of the curve.

Australian government bond futures were mixed, with the three-year bond contract YTTc1 off half a tick at 97.8400 and the 10-year contract YTCc1 up by a smilar amount at 97.3300. (Editing by Shri Navaratnam)

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