The Australian dollar looked to be heading for a fourth straight week of losses on Friday as the China virus dominated headlines, though the New Zealand dollar got a late lift from inflation data that just topped expectations. The Aussie was pinned at $0.6845 to be down 0.4% on the week so far. It had got as high as $0.6879 on Thursday after local jobs figures beat forecasts, but ran into resistance at the 200-day moving average of $0.6880.
It now risks testing support around the recent $0.6827 low. The kiwi dollar rallied to $0.6616 on the inflation report, taking it away from a $0.6581 trough and leaving it all but flat on the week. Consumer prices in New Zealand rose 0.5% in the December quarter, pipping forecasts of 0.4% thanks mainly to higher transport and travel costs. The annual pace edged up to 1.9% and close to the Reserve Bank of New Zealand's (RBNZ) objective of 2%, further undermining the case for a cut in interest rates.
The futures market currently implies only a 16% chance of a cut in February, rising to 52% by April. A move is fully priced in by July. Australian government bond futures were still holding solid gains for the week as investors hedged the economic risks stemming from the coronavirus outbreak in China. The three-year bond contract was up 3 ticks on the week at 99.270, while the 10-year contract was ahead by 10 ticks at 98.9050. "The strong rise in headline inflation should be enough to prevent the RBNZ cutting rates in February," said Ben Udy, an economist at Capital Economics.
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