The Australian and New Zealand dollars on Friday recouped a little of their recent hefty losses as their U.S. counterpart ran into profit-taking, though both remained vulnerable to a return of trade friction at any time.
The Australian dollar AUD=D4 inched up to $0.7383, from a one-year trough of $0.7345 hit on Thursday, but was still down 0.7 percent for the week. Major support lies at $0.7329, a low from May last year.
A soft reading on regional manufacturing in the United States and a sharp rebound in sterling had put a squeeze on long U.S. dollar positions overnight, sending the currency broadly lower.
Yet the Aussie has still lost two U.S. cents over the past two weeks, suffering in wake of a rate rise by the Federal Reserve and the latest bout of global brinkmanship on tariffs.
"It is now below our weekly fair value estimate for the first time this year," noted analysts at Westpac. "If U.S.-China trade tensions remain the market focus in coming weeks, risks are to $0.72/0.73."
"But Australia's key commodity prices have been broadly resilient, especially LNG and thermal coal, suggesting AUD downside should be contained multi-month," they added. "We look for $0.75 at the end of September."
The New Zealand dollar NZD=D4 clawed its way back to $0.6876 from a six-month low of $0.6826, but still nursed losses of 2.2 percent for the week.
Sentiment had not been helped by figures out Thursday confirming the local economy had slowed in the first quarter and inflation remained uncomfortably mute.
That led many to assume the Reserve Bank of New Zealand would keep a dovish tone at its policy review on June 28.
"Our spot trading team globally thinks the recent weak GDP print presents a compelling enough case for continued weakness in Kiwi," said an analyst note from Citi.
"We watch the recent lows of $0.6850 on the downside. A break through there opens up the path to at least $0.6780."
New Zealand government bonds
0#NZTSY= bounced a little with yields down around 2 basis points across the curve.Australian government bond futures gained with Treasuries, nudging the three-year bond contract YTTc1 up 2 ticks to 97.870. The 10-year contract YTCc1 added 2.5 ticks to 97.3400.
