Australian dollar at 6-week low as bond yields fall further

Australian dollar at 6-week low as bond yields fall further

28 Nov 2019 09:40 AM

The Australian dollar hit a six-week trough on Thursday as investors feared tensions over Hong Kong could sour the Sino-U.S. trade talks, while underwhelming economic news at home pulled bond yields yet lower.

The Aussie slipped as far as $0.6764 at one point after U.S. President Donald Trump signed into law congressional legislation backing protesters in Hong Kong. That provoked a warning from China's Foreign Ministry that Beijing would take "firm counter measures" against interference.

Adding insult to injury, data showed Australian business investment dipped 0.2% in the third quarter and a sharp drop in equipment spending likely dragged on economic activity. That was a black mark for gross domestic product (GDP) figures due next week that are expected to show another quarter of only modest growth.

The poor outlook only added to speculation of further rate cuts from the Reserve Bank of Australia (RBA) and futures are now fully priced for an easing to 0.5% by April.  They also imply a 54% chance of yet a further move to 0.25% by the end of next year.

Bonds extended their rally as yields on 10-year paper hit a six-week low of 1.036%, a sharp turnaround from a 1.34% top earlier this month.

Across the Tasman, the New Zealand dollar was enjoying a run of better economic news as a survey of businesses showed a marked improvement in mood this month. The kiwi dollar held firm at $0.6423.