SYDNEY (Reuters) - The Australian and New Zealand dollars hovered at multi-month lows on Friday as U.S.-China trade tensions showed no signs of easing, hitting risk sentiment across-the-board.
The Australian dollar, a liquid proxy for the Chinese yuan, stumbled to $0.6880, a level not seen since early January. The Aussie is set for its worst weekly performance since early February after hitting a new low every single day of this week.
The New Zealand dollar held close to a 6-1/2-month trough at $0.6539. For the week, the kiwi is down nearly 1 percent.
On Friday, the yuan fell past the psychologically important 6.9 per dollar level to its weakest in nearly five months.
The Aussie and the kiwi have been on a downswing since the start of May when U.S. President Donald Trump said he was going to raise tariffs on $200 billion of Chinese imports.
The antipodean economies are heavily reliant on global trade so a tariff war is bad news for the two countries. China is also the top trading partner for both Australia and New Zealand.
Domestic factors are also undermining the Aussie.
Financial markets are pricing in a 70 percent chance of an interest rate cut by Australia's central bank as soon as next month after an unwelcome rise in the jobless rate.
Earlier in the day, National Australia Bank (NAB) became the first of the country's four major banks to predict a rate cut in June.
"We also see the need for additional monetary stimulus in early 2020," NAB Chief Economist Alan Oster said in a note.
"There is little constraint from the risk of high inflation, but there is a need to see faster rates of growth and lower unemployment."
Westpac has forecast an easing for August while the Commonwealth Bank sees a flat trajectory for rates. ANZ said it would wait for minutes of the Reserve Bank of Australia's (RBA) May meeting due next Tuesday and a speech by Governor Philip Lowe the same day before finalising its call.
There is also some nervousness ahead of a closely-fought federal election on Saturday in which polls suggest the opposition Labor Party will outdo the incumbent Liberal-National coalition.
Election results will start pouring in from 0800 GMT on Saturday, though it could be days before one of the main parties declare victory in any close outcome.
The Aussie could take a further battering if there is a hung parliament, analysts said.
(Editing by Shri Navaratnam)
