By Cecile Lefort and Rebecca Howard
SYDNEY/WELLINGTON, Jan 15 (Reuters) - The Australian and New Zealand dollars were off lows on Friday but lacked upward momentum with investors wary of the economic slowdown and market volatility in China, a key export market for the Antipodean economies.
The Australian dollar AUD=D4 held at $0.6970, having touched a four-month trough of $0.6910 on Thursday. It briefly popped back above 70 cents but was unable to hold gains.
Undermining risk sentiment was renewed weakness in Chinese equities. Major support was found at $0.6892 and a break below will take it to lows unseen since early 2009.
For the week, the Aussie was on track for a tiny weekly gain of 0.1 percent, but fared better against the yen, euro and pound with a bounce of at least 1 percent.
The Aussie, which is often used as a liquid proxy for China, was still down more than 4 percent this year against its U.S. counterpart on worries that Beijing could be losing its grip on managing the slowdown of its economy.
"There is widespread bearish sentiment with the A$, with some forecasts as low as 60 US cents," said Stuart McPhee, a senior technical analyst at FX/CFD firm OANDA Australia and Asia Pacific.
He added that further falls in the Aussie lessened the chances of an interest rate cut by the Reserve Bank of Australia.
"This may see reduced selling therefore providing the A$ some support and restraining its slide a little."
Interbank futures 0#YIB: imply a three-in-four chance of an easing to a record low of 1.75 percent by May.
The New Zealand dollar NZD=D4 struggled to make friends at $0.6458, having touched a three-month trough of $0.6420 on Thursday. It was on track with a 1.3 percent weekly loss, its third consecutive weekly decline.
With little local data on the immediate horizon, the focus is firmly offshore, said ANZ Bank, noting the release later in the global day of a slew of U.S. data.
"The market will want to see if firmer real activity will help offset likely lower inflation expectations, keeping Fed policy normalisation on track," it says.
New Zealand government bonds 0#NZTSY= were unchanged.
Australian government bond futures retreated from multi-month peaks, with the three-year bond contract YTTc1 down 3 ticks at 98.050. The 10-year contract YTCc1 lost 4 ticks to 97.2850, while the 20-year contract YXXc1 was steady at 96.7900. (Editing by Simon Cameron-Moore)