The Australian dollar, often seen as a proxy bet on the Chinese economy, fell 0.31% to $0.67095, about a third of a cent above its 10-year low of $0.66775 hit on Aug. 7. Adding to the Aussie's woes, the country's building approvals unexpectedly plunged to a six-year low. The New Zealand dollar dropped 0.30% to a four-year low of $0.6290. It is the worst performing G10 currency this month with a fall of 4.1%.
The yen held flat at 106.49 per dollar, off this week's low of 106.68 hit the previous day. Risk assets got a mild lift on Thursday after China's commerce ministry said Beijing and Washington were discussing the next round of face-to-face talks in September, but the effect was short-lived. Washington is due to start imposing 15% tariffs on $125 billion worth of goods from China on Sunday, affecting a vast number of consumer items from smart speakers to sneakers.
Investors fear the intensifying trade dispute could lead the US economy into a recession, a scenario that has become more of a reality this week after the US bond yield curve inverted, a highly reliable indicator of a recession. "The talking point is still the US yield curve inversion and whether the US economy heads into a recession...In short, the atmosphere is not so good," said Bart Wakabayashi, Tokyo branch manager of State Street.
Despite the dollar's rebound against the yen this week, the Japanese currency is the best performer among major currencies this month, rising 2.2% so far. The second best was the Swiss franc, which has gained 0.7% so far this month, to 0.9879 per dollar. Sterling traded at $1.2183, on course to post its first weekly loss in three weeks on growing worries about a no-deal Brexit at the end of October.