The Australian dollar wobbled on Tuesday as a surprisingly weak reading of business activity stoked speculation interest rates might have to be cut this year to insulate the economy from threats at home and abroad.
The Aussie dipped 0.1 percent to $0.7156 and away from Monday's top at $0.7204, a level that now marks stiff chart resistance. The New Zealand dollar was flat at $0.6833, but again off Monday's $0.6872 peak.
The air of unease has underpinned Australian government bonds in recent days with 10-year yields near their lowest since late 2016 at 2.23 percent.
Three-year bond futures were up 1.5 ticks on Tuesday at 98.290, while the 10-year contract held steady at 97.7650.
Yields on New Zealand government bonds were a fraction lower across the curve.
A closely-watched index of Australian business conditions weakened sharply in December as sales, profits and employment all took a turn for the worse, a disappointing end to the year that will only add to concerns for 2019.
National Australia Bank's index of business conditions slid 9 points to +2 in December, an unusually steep fall for a single month, while confidence held at +3. The downturn will be unwelcome news for the Reserve Bank of Australia (RBA) which had long cited the resilience of business conditions as a major reason for optimism on the economy.
The central bank holds its first policy meeting of the year on Feb. 5 and markets had already wondered if it could stick to a long-standing call that the next move in rates would be up.
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