Australia, NZ dollars gain as US package, Brexit deal encourage risk

SYDNEY: The Australian and New Zealand dollars traded slightly higher against the greenback on Tuesday, as risk appetite was boosted by a new stimulus package in the US and a landmark Brexit trade deal.

The Australian dollar, a liquid proxy for risk, rose 16 basis points to $0.7593 in thin trading, as the safe-haven greenback languished near a 2-1/2-year low, as US lawmakers pushed forward with a COVID-19 relief package.

The Aussie is on track to end 2020 more than 8% highe, its biggest annual gain since 2017, having endured a roller coaster year, starting at $0.7007 before falling as low as $0.5469.

Rising iron ore prices, Australia's success in containing the novel coronavirus, global optimism with the advent of successful vaccines, and positive surprises around its economic recovery have fueled the Australian dollar's rally.

"We do expect a solid recovery in 2021, with global growth forecasts at 5.2 per cent - led by the US and China," Stephen Halmarick, economist at Commonwealth Bank of Australia said in a note.

The New Zealand dollar was up at $0.7118 on Tuesday, and was on track for its biggest annual gain since 2012.

Last week's Brexit agreement helped support the outlook for global growth, also lifting Asian stocks on Tuesday.

Australian yields were largely flat on Tuesday, with the 10-year last at 0.972%, compared to 0.968% on Dec. 14.

New Zealand government bonds were lower, sending yields about 2 basis points higher at the short and mid-points of the curve.

Australian government bond futures were little changed, with the three-year bond contract half a tick higher at 99.825 and the 10-year contract 3 ticks up to 98.98.