The Australian dollar was on the defensive on Friday at the end of a tough week as concerns swirled over Sino-U.S. trade talks and global growth, while investors also pondered the possibility of rate cuts at home.
The Aussie dollar AUD=D3 was pinned at $0.7086, having been as low as $0.7077 at one stage. It was down 1 percent on the week so far and threatening old support around $0.7020.
Sentiment took a knock when U.S. Commerce Secretary Wilbur Ross said the United States and China were "miles and miles" from resolving trade issues, though there was a fair chance a deal would be done eventually.
A 30-member Chinese delegation plans to come to Washington next week for talks, as the world's two largest economies try to meet a March 1 deadline to resolve their trade disputes.
The Aussie had already been under fire after National Australia Bank became the last of the four major to hike its variable mortgage rates, fuelling speculation the RBA might have to ease to counter this private-sector tightening in financial conditions.
That was seen as a body blow to an already reeling housing market and led investors to narrow the odds on a reduction in the 1.5 percent cash rate. Futures
0#YIB: imply around a 64 percent probability of a quarter-point cut by December."Given the shift in risk factors over the past couple of months the local rate market is correctly concluding that it's worth spending a few basis points to hedge against a move," said Sean Keane at Triple T Consulting.
"Our expectation is that the RBA will resist cutting for as long as possible," he added "We think the most likely timing for that will be at the November Board meeting."
The RBA is hardly alone in facing pressure on policy. European Central Bank President Mario Draghi on Thursday acknowledged that economic growth in the euro zone was likely to be weaker than earlier expected due to the fall-out from factors ranging from China's slowdown to Brexit.
"The read through was very much that a previously-posited rate rise after the summer now looks a very distant prospect," said David de Garis, director of economics at NAB.
"It's always a worry too when central banks assert that the risk of recession is low."
The New Zealand dollar NZD=D3 was faring better at $0.6760, and actually up 0.2 percent on the week so far.
It got a lift mid-week when domestic inflation proved to have been firmer than bears expected in the December quarter, restraining speculation about a cut in rates, at least in the short term.
Government bonds benefited from all the angst over trade and global growth, with the Australian three-year bond future YTTc1 up 4 ticks at 98.300. If it closes at that level, it would be the highest finish since mid-2017.
The 10-year contract YTCc1 add 5 ticks to 97.7800, implying a yield of 2.22 percent.
New Zealand government bonds
0#NZTSY= also rallied, pushing yields down as much as 4 basis points.
