SYDNEY/WELLINGTON (Reuters) - The Australian and New Zealand dollars were fighting a rearguard action on Friday as global tensions over tariffs and China pressured trade-sensitive currencies, overwhelming upbeat economic news at home.
The Aussie dollar <AUD=D3> was pinned at $0.7363, having shed 0.6 percent overnight to touch a two-week trough of $0.7356. The retreat brought into sight major support at $0.7310/18, which marks the lows for this year.
The kiwi dollar <NZD=D3> was down at $0.6732, after losing 0.7 percent overnight as fresh hostilities in the Sino-U.S. trade dispute undermined commodity prices.
China vowed on Thursday to retaliate if the United States acted on a threat to raise tariffs on its exports to 25 percent.
Both Australia and New Zealand are highly reliant on trade to the Asian giant and their currencies are often sold as liquid proxies for China risk.
Those concerns overshadowed Australian data showing retail sales climbed a surprisingly strong 1.2 percent in the second quarter as price discounting drove volume growth.
As a result, sales alone added almost A$1 billion to gross domestic product (GDP) in the quarter and suggested the economy had maintained its momentum after a brisk start to the year.
"Our Q2 GDP tracking is 0.9 percent growth for the quarter and 3 percent for the year," said Annette Beacher, chief Asia-Pacific macro strategist at TD Securities.
"This rebound will relieve the RBA as the pace of consumer spending tends to be the number 1 risk to the Bank's outlook."
The Reserve Bank of Australia (RBA) holds its monthly policy meeting on Aug. 7 and is considered certain to keep rates at 1.5 percent, marking two full years of no change.
While the bank is relatively optimistic on economic growth and employment, a lack of wage and inflationary pressure is providing plenty of scope to keep policy stimulative.
Futures markets <0#YIB:> imply no more than a 50-50 chance of a rate hike by August next year.
That steady outlook has kept Australian two-year bond yields <AU2YT=TWEB> in a tight band around 2 percent even as U.S. yields have climbed to decade highs. Currently, Australia pays 61 basis points less than the U.S. to borrow for two years.
Australian government bond futures were little changed on Friday with the three-year bond contract <YTTc1> half a tick lower at 97.850. The 10-year contract <YTCc1> was flat at 97.2650.
New Zealand government bonds <0#NZTSY=> were equally quiet.
(Editing hy Shri Navaratnam)
