The Australian dollar took a knock on Thursday after two more major local banks announced rises in mortgage rates, a move that could add to downward pressure on home prices and push out any hike in official interest rates.
Australia and New Zealand Banking Group (ANZ) and Commonwealth Bank (CBA) joined Westpac (WBC) in lifting variable home loan rates to protect profit margins in the face of higher wholesale funding costs.
The increases were only modest but with home prices already under water across much of the country any lift in borrowing costs could weigh on housing demand.
That risk will only add to the case against a hike in rates from the Reserve Bank of Australia (RBA), which just this week emphasised that any move was some way away.
Investors reacted by shoving the Aussie dollar AUD=D3 down a quarter of a cent to $0.7175, and back toward the recent 20-month trough of $0.7145.
Analysts had already been disappointed at the Aussie's failure to rally more in the wake of Wednesday's surprisingly strong Australian growth numbers, and as the U.S. dollar suffered a pullback of its own.
Instead, it was the euro making the running as it hit its highest against the Aussie since February 2016 at $1.6221 EURAUD= .
The single currency has climbed around six cents in the just the past three weeks as investors shorted the Aussie as a hedge against turmoil in emerging markets.
"The Aussie has underperformed the Euro move as concerns over the EM crisis persist," said Greg McKenna, chief market strategist at broker AxiTrader.
"We should all be thankful for the relative stability of U.S. stocks which are the only thing between where we are now and a full-blown global markets rout," he added.
Adding to the angst was uncertainty about whether and when U.S. President Donald Trump might act on a threat to impose tariffs on another $200 billion of Chinese goods.
Trump on Wednesday said that the United States was not yet ready to come to an agreement with China but that talks would continue.
The same concerns limited the New Zealand dollar's NZD=D3 bounce to $0.6591, after it hit a two-and-a-half year low of $0.6529 on Wednesday.
New Zealand government bonds
0#NZTSY= eased, sending yields 1 basis point higher towards the long end of the curve.Australian government bond futures were mixed, with the three-year bond contract YTTc1 up 1.5 ticks at 97.990. The 10-year contract YTCc1 dipped 1 tick to 97.4400.
