The Australian dollar was on the defensive on Friday at the end of a tough week as concerns swirled over Sino-US trade talks and global growth, while investors also pondered the possibility of rate cuts at home. The Aussie dollar was pinned at $0.7086, having been as low as $0.7077 at one stage. It was down 1 percent on the week so far and threatening old support around $0.7020. Sentiment took a knock when US Commerce Secretary Wilbur Ross said the United States and China were "miles and miles" from resolving trade issues, though there was a fair chance a deal would be done eventually.

A 30-member Chinese delegation plans to come to Washington next week for talks, as the world's two largest economies try to meet a March 1 deadline to resolve their trade disputes. The Aussie had already been under fire after National Australia Bank became the last of the four major to hike its variable mortgage rates, fuelling speculation the RBA might have to ease to counter this private-sector tightening in financial conditions.

The New Zealand dollar was faring better at $0.6760, and actually up 0.2 percent on the week so far.

It got a lift mid-week when domestic inflation proved to have been firmer than bears expected in the December quarter, restraining speculation about a cut in rates, at least in the short term. Government bonds benefited from all the angst over trade and global growth, with the Australian three-year bond future up 4 ticks at 98.300. If it closes at that level, it would be the highest finish since mid-2017.

The 10-year contract add 5 ticks to 97.7800, implying a yield of 2.22 percent.

New Zealand government bonds also rallied, pushing yields down as much as 4 basis points.

Copyright Reuters, 2019