The Australian dollar was attempting its fourth straight session of gains on Thursday as markets chose to take a less pessimistic view on the coronavirus, while domestic data suggested the economy was still growing in the last quarter of 2019.
The Aussie crawled up to $0.6753 <AUD=D3> and further away from the recent four-month trough of $0.6679, but faces stiff chart resistance around $0.6770.
The New Zealand dollar <NZD=D3> lagged again at $0.6473, still not far from Monday's two-month low at $0.6650.
The Aussie got a lift when data showed retail sales volumes rose 0.5% in the December quarter, topping forecasts of 0.3% and the strongest result in over a year.
That implied household consumption added modestly to economic growth in the quarter and outweighed a pullback in nominal sales for December alone.
Separate figures on the country's trade account suggested net exports also added to growth in the quarter.
"The impact of income tax and cash rate cuts appears to finally be feeding through to spending," said Sarah Hunter, chief economist at BIS Oxford Economics.
"The data will be welcome news for the RBA, who signalled this week that they expect a pick-up in consumer spending to underpin an acceleration in growth this year."
The Reserve Bank of Australia (RBA) stuck to its upbeat outlook when leaving interest rates unchanged at the first policy meeting of the year on Tuesday.
RBA Governor Philip Lowe underlined the optimistic message in a speech on Wednesday while emphasising the risk of very low interest rates, leading investors to sharply scale back wagers on further cuts.
Futures <0#YIB:> imply just a 22% chance of a quarter point cut in April, down from 80% at the start of the week, while May was put at a 52% probability.
A move to 0.5% was now only fully priced by November, out from June before Lowe's speech, and the market had given up on the chance of a further easing to 0.25%.
Bonds took an added blow from the general improvement in global risk appetite, and yields on three-year bonds <AU3YT=RR> climbed to 0.756% and away from the recent all-time low of 0.553%.
Three-year bond futures <YTTc1> were off 4 ticks at 99.250, while the 10-year contract <YTCc1> fell 5 ticks to 98.9050.
China's efforts to contain the coronavirus outbreak, and pledges to support its economy appear to have calmed markets roiled by fears about the epidemic's impact on global growth.
Still, the fallout from the outbreak was being increasingly felt in Australia's tourist and student sectors, darkening the outlook for the current quarter.
Analysts at Westpac warned the economy could stall in the quarter, before rebounding in the June quarter, though much depended on how long epidemic lasted.
"We remain of the view that further policy accommodation will prove necessary when it becomes clear to the RBA that its current overly-optimistic expectations for growth and jobs are not being met," they wrote in a note.
(Editing by Shri Navaratnam)
