The Australian and New Zealand dollars managed a modest bounce on Wednesday as a pause in the Sino-US sabre rattling over trade allowed Asian markets to calm a little. The Aussie dollar clawed its way back to $0.7397, after bouncing from a one-year trough of $0.73475 hit on Tuesday.
That was still uncomfortably close to a double-bottom of $0.7329/7333 touched in May last year, and a break of that bastion would open the way to lows around $0.7160 reached in late 2016.
The New Zealand dollar hovered at $0.6909, after finding support around $0.6885. The currencies have taken collateral damage in recent days as US President Donald Trump's plan to impose more tariffs on Chinese goods ramped up the risk of a trade war.
New Zealand government bonds eased as Asian markets stabilised somewhat, lifting yields as much as 3 basis points. Australian government bond futures dipped, with the three-year bond contract off 1.5 ticks at 97.880. The 10-year contract lost 1 tick to 97.3550.
Trade flows make up a big share of the Australian and New Zealand economies - much larger than for, say, the United States - and both export heavily to China.
Yet dealers said markets had been spooked by Trump's proposals before, only to recover when he failed to follow through. "Markets are conditioned to buy the dip because let's face it, the world didn't end," quipped Greg McKenna, chief market strategist at CFD and FX provider AxiTrader. "It's just a trade war between the US and almost everyone else on the planet."
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