The Australian dollar slipped from early highs on Thursday as renewed worries of a global trade war gripped investors ahead of a US tariff announcement on Chinese imports, while the New Zealand dollar held on to overnight gains.
The feared duties, expected later in the day, are aimed at curbing what the United States says is theft of its intellectual property and technology. The size and scope of the tariffs are not known yet. Harsh measures could trigger retaliation from Beijing and any subsequent trade war would severely disrupt global growth which is seeing its first synchronised upturn in years.
Open, export-heavy economies such as Australia, New Zealand and Canada are particularly vulnerable. These concerns sent the Australian dollar down 0.3 percent to $0.7743 in afternoon trade from as high as $0.7793 earlier in the day.
The Aussie and its New Zealand cousin rallied overnight after the US Federal Reserve wrong-footed hawks by maintaining its future rate projection, or 'dot plot' at three hikes this year against bets of four increases. The kiwi was last up 0.1 percent at $0.7236, having risen about 0.7 percent overnight to $0.7245.
New Zealand government bonds edged up, sending yields down about 2 basis points at the long end and 3 ticks at the long end. Australian government bond futures were mixed, with the three-year bond contract down 2.5 ticks at 97.80. The 10-year contract added 2.5 ticks to 97.31. Market attention has now shifted to the next major risk event, analysts said.
"President Donald Trump's planned tariff announcement won't be positive for global trade, and that is potentially very negative for Australia, and all other trading nations," Sean Keane of Triple T Consulting wrote in a note prepared for Credit Suisse.
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