The Australian and New Zealand dollars were on the ropes on Friday as the threat of new US tariffs against China, hammered risk assets and sent bond yields tumbling to all-time lows.
President Donald Trump stunned markets on Thursday by tweeting he would impose a 10% tariff on the remaining $300 billion of Chinese imports starting Sept. 1, ending a truce in the US-China trade war.
Fearing the negative fallout on business investment, investors rushed to wager on ever-more aggressive stimulus from central banks at home and abroad.
The initial reaction was a stampede into the safe-harbour of the Japanese yen, with the Aussie sinking 1.9% overnight in the sharpest daily drop since May 2017.
On Friday, it was off at 73.00 yen, lows last seen only fleetingly during the flash crash of early January and a loss for the week of 2.8%.
In Australian dollar terms, gold shot up 2.2% overnight to an all-time peak of A$2,126 an ounce.
The Aussie took an added hit by being a liquid proxy for China risk, given the Asian giant takes over a third of Australia's entire exports.
That left it down at $0.6814 having slumped 0.7% overnight to be down 1.4% on the week so far. The last time it spent any time at these depths was during the global financial crisis in late 2008 and early 2009.
Likewise, the kiwi touched its lowest against the yen since June 2016 at 69.97, after shedding 1.4% overnight. It
hit a six-week low on the US dollar and was last at $0.6545 , a loss of 1.3% for the week.
The Reserve Bank of New Zealand (RBNZ) holds a policy meeting next week and futures now imply a 100% probability of a quarter point rate cut to 1.25%, and likely a move under 1% in the first half of 2020.
Yields on two-year bonds were already down at an historic low of just 1%, while 10-year yields dropped to 1.48%.
In Australia, yields on the liquid three-year bond also reached record lows at 0.75% to be down a huge 108 basis points for the year so far.
The 10-year bond futures contract surged 11.5 ticks to 98.9000, implying a yield of 1.10%.
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