The Australian and New Zealand dollars on Friday recouped a little of their recent hefty losses as their US counterpart ran into profit-taking, though both remained vulnerable to a return oof trade friction at any time The Australian dollar 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.
The New Zealand dollar 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. New Zealand government bonds 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 up 2 ticks to 97.870. The 10-year contract added 2.5 ticks to 97.3400.
A soft reading on regional manufacturing in the United States and a sharp rebound in sterling had put a squeeze on long US dollar positions overnight, sending the currency broadly lower. Yet the Aussie has still lost two US 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 US-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."
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