SYDNEY (Reuters) - The Australian and New Zealand dollars recovered from an early stumble on Monday as the prospect of more economic stimulus in China helped stocks there bounce and supported the outlook for commodity demand.
The Aussie dollar <AUD=D3> stood at $0.7114, having edged up from a $0.7077 low, but it has had no luck piercing tough chart resistance around $0.7150.
The kiwi dollar <NZD=D3> was a fraction firmer at $0.6598 and near its highest in three weeks, though it had trouble holding above $0.6600.
Talk of Chinese stimulus sent Shanghai blue chips <.CSI300> up more than 4 percent and aided risk appetite across Asia.
Beijing's planned tax cuts for next year will likely exceed the extent of those seen in the United States, a central bank adviser said in remarks published on Monday.
The government also published a draft version of new rules for tax deductions available to individuals.
The news helped offset political uncertainty in Australia, where the ruling Liberal party suffered a major defeat in a by-election that saw the largest swing ever.
The loss stripped the government of its one-seat majority in parliament and will make it harder to get legislation enacted, though its survival is not automatically threatened.
"While the level of political noise may rise over coming months, we do not think this is a 'game changer' for the economy and markets," Nomura economist Andrew Ticehurst said in a note.
"We also judge that the probability of an early election has not risen materially and believe that May 2019 is still the most likely timing."
However, Ticehurst said he suspected the punishing vote would tempt the government to offer more fiscal sweeteners ahead of the election, perhaps delaying the budget's return to surplus.
Australian government bond futures fell, with the three-year bond contract <YTTc1> down 1.5 ticks at 97.880. The 10-year contract <YTCc1> dropped 2.5 ticks to 97.2800.
The New Zealand government bond market <0#NZTSY=> was closed for a holiday.
(Editing by Richard Borsuk)
