SYDNEY/WELLINGTON (Reuters) - The Australian and New Zealand dollars bounced off the canvas on Tuesday as signs U.S. and Chinese officials were still talking on trade helped soften the body blow of UK Brexit chaos.
Sentiment improved just marginally after China's Commerce Ministry said Vice Premier Liu He spoke on Tuesday with U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer.
The discussion on pushing forward the next stage of trade talks came as a welcome salve after the arrest of a top executive at Chinese telecoms giant Huawei Technologies had threatened to scupper the process.
The glimmer of hope was enough to lift the Aussie dollar <AUD=D3> up to $0.7200 and off a four-week low of $0.7170.
Resistance was still lined up at $0.7227, with major chart support at $0.7164 where a breach would open the way for a retreat back toward the $0.7020/50 zone.
The kiwi dollar <NZD=D4> edged ahead to $0.6882, having found solid support around $0.6840. It faces resistance at $0.6904.
Both currencies had taken collateral damage overnight after British Prime Minister Theresa May stunned lawmakers by postponing a parliamentary vote on her Brexit deal, saying it faced certain defeat.
The news sent sterling skidding to its lowest in 20 months against the U.S. dollar, which benefited from having the world's most liquid bond market as a bolt-hole for investors. [GBP/]
The pound also lost ground on the Aussie to hit A$1.7443 <GBPAUD=R>, having fallen 1.2 percent overnight.
"The UK's divided nation and divisive politics mean that without support and concessions from the EU, more difficult and market unsettling alternatives lie ahead," said Westpac macro strategist Tim Riddell.
"Until any form of certainty can be found, UK assets and GBP will remain under downside pressure as will the economy as investment is withheld and activity subdued."
All this tumult kept Australia's top-rated sovereign bonds well supported. Yields on 10-year paper held at 2.445 percent <AU10YT=RR> and near the lowest since June 2017, having fallen 40 basis points in just the past month.
Futures were a whisker off their highs, with the three-year bond contract <YTTc1> down one tick at 98.055. The 10-year contract <YTCc1> eased 0.75 ticks to 97.5475.
Yields on New Zealand 10-year paper <0#NZTSY=> were just above their lowest since late 2016 at 2.46 per cent.
(Editing by Richard Borsuk)
