SYDNEY: The Australian and New Zealand dollars were testing recent highs on Tuesday as a landmark deal on European Union recovery funding underpinned risk sentiment globally, while the Australian government committed to more stimulus at home.
After days of talks, EU leaders reached a deal on a 750 billion euro stimulus plan that narrowed yield spreads, particularly for Italian debt, and shoved the euro higher at the expense of the US dollar.
That helped the Aussie nudge up to $0.7017 having been as far as $0.7035, just short of the July top of $0.7038. It was also back in sight of major chart resistance at the June peak of $0.7069.
The kiwi dollar stood at $0.6566 after reaching $0.6588, a whisker from its recent high of $0.6600. A break there would take it to ground last trod in January.
Three-year bond futures did ease slightly least week as the government sold a massive A$17 billion ($11.93 billion) of a new 2025 line, but Lowe said this was just market "indigestion" and would quickly abate.
Futures edged up to 99.700 on Tuesday and away from a four-month trough of 99.6800.
That resilience was welcome as the government announced an extension to much-needed job support programs that would cost billions in new borrowing.
Reserve Bank of Australia (RBA) Governor Philip Lowe said that, while he would like to see the Aussie lower, it was hard to argue the currency was overvalued right now given the strength of commodity prices and Chinese demand.
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