The Australian dollar skidded on Wednesday after three straight winning sessions on reports Washington was considering slapping higher import tariffs on Chinese goods while the New Zealand dollar dipped on disappointing jobs data.
The Australian dollar AUD=D3 , a liquid proxy for China plays, was last down 0.2 percent at $0.7414 from Tuesday's high of $0.7441.
The Aussie fell to a 1-1/2 year trough of $0.7318 earlier this month and has since been confined to a $0.7318-$0.7464 band amid worries about the impact on global growth and its own economy from a full-blown trade war.
U.S. President Donald Trump looked to revive the confrontation on trade as reports emerged he would propose tariffs of 25 percent, instead of 10 percent, on $200 billion in Chinese imports. The announcement could come later in the day.
Also weighing on the Aussie, data out from China showed its manufacturing sector grew at the slowest pace in eight months in July as export orders declined yet again in a sign of a darkening outlook for the economy amid the tariff dispute.
Analysts see headwinds for the currency over the short term. "Lack of dialogue between the U.S. and China along with the increase in negative rhetoric, point to the risk of trade tensions getting worse before they get better," analysts at National Australia Bank said in a note.
"The near term risks to the AUD are tilted to the downside and from a technical perspective, a break below the 0.7330 trend support would make us weary of a move down towards 71 cents."
Across the Tasman Sea, the New Zealand dollar NZD=D3 was off 0.2 percent at $0.6801 for its second straight day of losses.
Data out earlier showed New Zealand's jobless rate nudged up last quarter while wage growth remained benign, a signal interest rates will remain stimulatory for a while yet.
The unemployment rate came in at 4.5 percent for the three months ended June when analysts had looked for 4.4 percent. Annual wage growth was subdued at 1.9 percent and even that was largely thanks to an increase in minimum wages.
"If we exclude that and the effects of the Care and Support Workers pay settlement on 1st July 2017, then wage growth would still be at a record low of 1.5 percent," said Paul Dales, Sydney-based economist at Capital Economics.
Last month, New Zealand announced an increase in wage rates for all mental health and addiction support workers to between NZ$19 and NZ$27 per hours over five years. The new rates are back-dated to July 1, 2017.
"Overall, with GDP growth slowing and business confidence plunging, the labour market will probably now be a headwind rather than a tailwind for households," Dales said.
"It does support our view that rates won't be raised until mid-2020, which would be later than the markets and the RBNZ are assuming."
New Zealand government bonds
0#NZTSY= fell, sending yields 2.5 basis points higher at the long-end of the curve.Australian government bond futures eased too, with the three-year bond contract YTTc1 down 3 ticks at 97.860. The 10-year contract YTCc1 slipped 5.5 ticks to 97.290.
