The dollar nursed losses against most major currencies on Friday, as central banks in Switzerland and the UK refrained from following the Federal Reserve in cutting rates, while risk appetite ebbed on caution about US-China trade talks.
Sterling hit a two-month high of $1.2560 against the greenback overnight after European Commission President Jean-Claude Juncker said he thought Brussels could reach a deal with Britain to leave the European Union.
The Swiss National Bank, the Bank of England and the Bank of Japan all kept their policies on hold on Thursday. Their currencies rose and mostly held gains in Asian trade.
The exception was the Antipodes, where the Australian and New Zealand dollars languished around two-week lows after a slew of soft data capped by an uptick in Australian unemployment that prompted a rush to price in fresh rate cuts for October.
“Both the Aussie and kiwi have underperformed this week and I blame the Aussies for that one,” said Jason Wong, senior market strategist at BNZ in Wellington.
“The unemployment rate ticking up yesterday has fuelled expectations that the (Reserve Bank of Australia) is going to cut next month as opposed to November, and the kiwi's been in that downdraft.”
The Australian dollar held at $0.6793 in morning trade, close to its lowest since Sept. 4, while the New Zealand dollar hit $0.6297, its weakest since Sept. 3.
Economists at Citi on Friday joined Australia's major banks in predicting an October rate cut.
The dollar was steady buying 108.00 Japanese yen, after falling from close to a seven-week peak hit on Thursday.
It was slightly weaker against the Swiss franc at 0.9921 per dollar and the euro at $1.1050 and flat against a basket of currencies at 98.334.
Investors are also focused on US-China trade talks in Washington, aimed at laying the groundwork for high-level discussions next month.
However, most traders are cautious. Few signs of progress have emerged and with a wide gulf between both sides remaining, it is weighing on the recent risk-on mood.
“If you look at the Aussie dollar or renminbi it's faded,” said Joe Capurso, senior currency strategist at the Commonwealth Bank of Australia in Sydney.
“Both of those currencies have weakened in the last three or four days,” he said. “I think market participants are going to need something concrete to really rally...at the moment there's just not enough.”
The Chinese yuan steadied to just under a one-week low at 7.0990 per dollar in offshore trade, with investors eyeing a possible benchmark lending rate reduction later in the day.
China's central bank is trying to guide borrowing costs lower to help an economy suffering from the trade war.