The Australian dollar has slipped as bond yields extended their breakneck decline to multi-year lows amid speculation interest rates would have to be cut in coming months.
The drop in yields even overshadowed expectations the US Federal Reserve would sound dovish at its policy meeting later on Wednesday (early on Thursday, AEDT).
Bonds have rallied hard in the last couple of weeks amid soft economic data globally and strong investor demand.
Yields on Australian three-year notes have dived 23 basis points since the start of March to hit 1.485 per cent, breaking under the 1.5 cash rate for the first time since late 2016.
The 10-year bond futures contract has surged 29 ticks to 98.0700 in little more than two weeks, taking it nearer to the all-time peak of 98.2000.
The shift mirrors the move in futures markets, which have sharply narrowed the odds on a policy easing, in part because a slide in home prices is weighing on consumer spending.
Reserve Bank of Australia Assistant Governor Michele Bullock on Wednesday argued that the risks from housing were contained for now, though she also urged banks not to tighten their lending standards so much as to depress prices further.
The central bank is still counting on the labour market to stay resilient and lift wages and growth over time, heightening attention on the February employment report due on Thursday.
Median forecasts are for a moderate 14,500 rise in jobs and a steady unemployment rate of 5.0 per cent.
“The risk, however, is employment is below expectations because of the sharp slowdown in the economy in the second half of 2018,” said Joseph Capurso, a senior currency strategist at CBA.
“Any sign of a rise in the unemployment rate will have the RBA on high alert and will weigh on the AUD.”
Speculators were already selling the Aussie in anticipation. It was down 0.23 per cent at 1357 AEDT, buying 70.73 US cents. It has support around 70.50 cents and the recent rough of 70.03 cents.
The New Zealand dollar was down 0.26 per cent, to 68.36 US cents.