SYDNEY (Reuters) - The Australian and New Zealand dollars were heading for steep weekly losses on the safe haven yen on Friday as the risk of a partial shutdown of the U.S. government piled pressure on already shaky equity markets.
They fared a little better on the U.S. dollar, which had troubles of its own from political uncertainty to sharply lower Treasury yields.
The yen and Swiss franc were the big gainers as U.S. President Donald Trump refused to sign a bill funding the government, setting up a last minute showdown with Democrats in the senate.
That left the Aussie pinned at 79.21 yen <AUDJPY=>, having shed 1 percent overnight. It was now down almost 2.7 percent for the week, the worst performance since April 2016.
The kiwi was off 2 percent for the week so far at 75.48 yen <NZDJPY=> and near its lowest since early November.
The threat of a U.S. government shutdown over Christmas came as investors were already fretting that the economy would not be able to withstand further rate rises from the Federal Reserve.
That uncertainty helped the Aussie steady for the moment on the U.S. dollar at $0.7114 <AUD=D4>, though it was still 0.8 percent lower on the week.
The kiwi edged up to $0.6788 <NZD=D3>, from a trough of $0.6725, to leave it off 0.1 percent for the week so far.
That was a relatively robust performance given the knock it took on Tuesday when domestic data on economic growth badly missed market forecasts.
Investors responded by taking 10-year bond yields <NZ10YT=RR> to their lowest since October 2016 at 2.636 percent as they priced in a more dovish stance from the Reserve Bank of New Zealand .
"The market's estimates for the RBNZ's policy have changed radically," said Marshall Gittler, chief strategist at ACLS Global.
"On Tuesday, the market saw a 32 percent chance of a rate hike next year and no chance at all of a cut. Now, it sees only a 3 percent chance of a hike next year and an 8 percent chance of a cut."
Australian bonds also had a barnstormer of a week, with 10-year cash yields <AU10YT=RR> reaching their lowest since mid-2017 at 2.378 percent.
The 10-year bond future <YTCc1> was up 9 ticks for the week at 97.6250, while the three-year contract <YTTc1> added 14 ticks to 98.150.
(Editing by Shri Navaratnam)
