The Australian and New Zealand dollars inched ahead on Wednesday as upbeat economic news from China helped offset fresh fears of a global trade war. The Aussie dollar firmed 0.1 percent to $0.7867, after being as high as $0.7898 at one stage overnight. The kiwi dollar edged up 0.2 percent to $0.7343, just short of a top of $0.7355.
Sentiment was helped by data showing Chinese industrial output and fixed asset investment handily beat expectations in the January-February period, while retail sales were in line with forecasts. Both currencies had wobbled overnight after US President Donald Trump fired his secretary of state and floated the idea of tariffs on up to $60 billion of imports from China.
New Zealand government bonds gained, sending yields 4.5 basis points lower. Australian government bond futures also firmed in line with Treasuries, with the three-year bond contract up 4 ticks at 97.895. The 10-year contract rose 5.25 ticks to 97.2550.
As open economies that rely heavily on free trade, Australia and New Zealand would have much to lose should US protectionism lead to tit-for-tat reprisals globally. Australia in particular is vulnerable as a producer of basic commodities used in the world supply chain and the Aussie faded even as the US dollar lost ground to the yen and euro.
"How low it goes depends in no small measure on whether or not this is another one day wonder for risk appetite," said Greg McKenna, chief market strategist at AxiTrade. "A shallow bout of this market malaise would see the Australian dollar retain its support, $0.7840 hold, and the obvious ailments of the US dollar again push AUDUSD back to and possibly through 79 cents."
Domestic data offered little excitement with the Westpac consumer sentiment index edging up 0.2 percent in March, with optimists only just outnumbering pessimists.