By Wayne Cole
SYDNEY, Aug 30 (Reuters) - The Australian dollar took a knock on Friday as data underlined the dire state of the local home building sector, while the New Zealand dollar made another four-year low having fallen for five straight sessions.
The Aussie AUD=D3 eased 0.2% to $0.6710, threatening support at $0.6690 and the recent decade-low of $0.6678. That left it down 0.6% for the week so far.
The kiwi NZD=D3 slipped 0.3% to another fresh trough at $0.6291, bringing losses for the week to a hefty 1.6%.
Both have been undermined by a string of disappointing domestic economic data that only added to expectations of further rate cuts, and even unconventional easing.
Friday's figures showed approvals to build homes in Australia sank 9.7% in July, far beyond forecasts of a flat result, with multi-units diving 18% amid a glut of new supply and a squeeze on bank financing.
"The July update is clearly much weaker than expected and raises the risk that building activity may take another leg lower," said Westpac senior economist Andrew Hanlan.
"As always, we caution about reading too much into one month's data, particularly with volatile high rise approvals, but there is enough here to warrant careful monitoring in coming months."
Figures due next week are expected to show the economy grew at its slowest annual pace in a decade in the June quarter, dragged down by housing and anaemic consumer spending.
Investors still doubt the Reserve Bank of Australia (RBA) will ease at its September policy meeting next week given it had already moved in June and July, but futures 0#YIB: imply a 70% chance it could cut a quarter point to 0.75% in October.
A further easing to 0.5% is seen by March at the latest, with some wagering a move to 0.25% is ultimately possible.
The central bank has sounded reluctant to go so far, in part because lower rates will tempt households to borrow more at a time when debt is already at record highs.
"Especially in the context of weak growth in household income, high debt levels could complicate future monetary policy decisions by making the economy less resilient to shocks," the RBA said in its 2019/20 corporate plan released on Friday. L3N25Q0UG
Yields on three-year government debt AU3YT=RR fell back to 0.680%, from an early 0.74%, in the wake of the housing data. The 10-year bond futures contract YTCc1 was still off 2 ticks at 99.1000, but that was up from a low of 99.075.
New Zealand two-year yields NZ2YT=RR held at 0.815%, having fallen on Thursday in the wake of a dismal survey of business activity.
Markets are pricing in around an 80% chance the Reserve Bank of New Zealand (RBNZ) will cut its 1% cash rate a quarter point by November, with a further easing likely sometime next year. RBNZWATCH
(Editing by Simon Cameron-Moore)