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Aussie dollar higher ahead of trade talks

Swati Pandey

The Australian dollar has inched up, though expectations for further policy easing and caution about key Sino-US trade talks capped gains.

The Aussie was last up 0.1 per cent at 67.40 US cents, below technical resistance around US cents 67.80.

A breach above could take it to 68 cents - a level it has failed to sustain since late September.

Meanwhile the New Zealand dollar was last up 0.3 per cent at 63.06 US cents, partly reversing Friday's 0.5 per cent fall.

The two currencies have been on a downtrend since early September as weaker-than-expected economic indicators pointed to a need for more policy easing by Australia and New Zealand.

However, both the Aussie and the kiwi have moved up from recent lows, mainly rooted in a pullback in the US dollar as fears of recession in the world's largest economy increased.

Investor attention was squarely on pivotal trade talks between the United States and China, which began in Washington on Monday at deputy level.

Late this week, there will be top-level talks as Chinese Vice Premier Liu He meets US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.

On October 15, the United States is scheduled to increase tariffs on $US250 billion worth of Chinese goods to 30 per cent from 25 per cent.

In Australia, a survey of business conditions released on Tuesday showed a slight improvement though the overall trend was still weak despite three rate cuts by the Reserve Bank of Australia (RBA) and signs of revival in the country's subdued housing market.

"Rate cuts will help but will lag and with weak consumer (sentiment) and higher global uncertainty, we are unlikely to see a material improvement in the short-term," NAB chief economist Alan Oster said.

A gauge of Australia's employment sector, also released on Tuesday, showed job advertisements steadied in September after a sharp decline the previous month.

"But this does not necessarily indicate a turning-point in the labour market," said ANZ senior economist Catherine Birch.

"We may see job ads deteriorate again in future months."

In New Zealand, the government reported a better-than-expected surplus of NZ$7.5 billion for the 2018/19 year, supported by a stronger economy.

New Zealand government bonds were barely changed.

Australian government bond futures eased, with the three-year bond contract off 2 ticks at 99.44. The 10-year contract was off 1.5 ticks at 99.125.