TOKYO (Reuters) – The Australian dollar held firm on Tuesday near a 4-1/2-month peak on optimism about U.S.-China trade relations, while the British pound was on the defensive as worries resurfaced about a chaotic departure from the European Union.

The Australian dollar fetched $0.69175 AUD=D4 flat in Asia but within striking distance of its Dec. 13 peak of $0.6939, its highest level since late July. The currency has gained over 1% in the past four sessions.

China said on Monday it will lower tariffs on products ranging from frozen pork and avocado to some types of semiconductors next year as Beijing looks to boost imports amid a slowing economy and a trade war with the United States.

“It is possible to view this news as supporting the Aussie dollar, but considering that the Aussie has been strong since last Thursday, we should probably think that it reflects waning concerns over geopolitical risks,” said Tohru Sasaki, head of research at J.P. Morgan.

Other risk sensitive currencies were also generally well-supported.

The New Zealand dollar NZD=D4 stood at $0.6625, just below a five-month high of $0.6639 hit on Monday, while many emerging market currencies, including the Mexican peso MXN=D4, the Indonesian rupiah IDR= and the Russian rouble RUBUTSTN=MCX, held near multi-month peaks.

The British pound, however, slipped to three-week lows as the market braced for more uncertainty after the United Kingdom officially leaves the European Union in January.

As Prime Minister Boris Johnson has made it illegal to extend trade talks with the EU beyond the end of next year, investors fret the country could crash out without any trade deal.

Other major currencies moved little in holiday-thinned trade on Tuesday.

The euro stood almost flat at $1.1087 EUR= while the yen was little changed at 109.40 yen per dollar JPY=.

The dollar index =USD stood at 97.689, off Monday’s high of 97.820.

The dollar showed a limited response to a soft reading in new orders for key U.S.-made capital goods.

Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, edged up just 0.1% in November, slightly below market expectations.

U.S. capital expenditure is likely to stagnate in coming months after Boeing (BA.N) announced last week it would suspend production of its best-selling 737 MAX jetliner following two fatal crashes of the now-grounded aircraft.

The firm’s failure to resolve its crisis led it to oust Chief Executive Dennis Muilenburg on Monday.

Graphic: World FX rates in 2019 here

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