By Swati Pandey
SYDNEY, June 3 (Reuters) - The Australian dollar was surprisingly upbeat on Monday, defying the downturn in global risk appetite from the ongoing Sino-U.S. trade war although broader concerns about the world economy kept the currency under pressure against the Japanese yen.
The currency AUD=D4 , seen as a liquid proxy for risk, was last up 0.2% at a two-week high of $0.6952 against the greenback.
On the yen, the Aussie AUDJPY=R fell to 75.13, a level not seen since early January when a currency "flash crash" briefly dragged it to as low as 71.66.
The pair broke below a crucial chart support around 75.30 on Friday on fears U.S. President Donald Trump's aggressive trade diplomacy could tip the world to recession.
"AUDJPY: A trade I've been flagging for a while now and is working well as a hedge against slower global growth," said Chris Weston, analyst at Pepperstone. "...I am happy to stay short."
Australia's export-heavy economy is reliant on China's trade with the rest of the world so a slowdown in global growth is bad news for the nation's currency.
"There are risks to holding AUD shorts of course, given tomorrow's cut from the RBA (Reserve Bank of Australia) is 100% priced, and the bank needs to be dovish enough to justify the three cuts priced into markets over the coming 12 months," Weston added.
All 44 economists in a Reuters survey expect the RBA to cut its cash rate to an all-time low of 1.25% at its June policy meeting on Tuesday. AU/INT
Financial markets are fully pricing in a second cut by September and see a 50-50 chance for a third move by Christmas. 0#YIB:
Official figures out earlier in the day suggest the economy likely picked up steam last quarter but that will still not be enough to stave off a cut on Tuesday as home prices were still in a downswing and the labour market was showing signs of weakness. on Australia's gross domestic product growth is due on Wednesday and is expected to show the economy likely expanded by a pedestrian 0.4% in the first quarter of this year.
Australian government bond futures eased, with the three-year bond contract YTTc1 down 2.5 tick at 98.875. The 10-year contract YTCc1 eased 5.5 ticks to 98.475.
Across the Tasman Sea, the New Zealand dollar NZD=D4 was up 0.1% at $0.6547.
The kiwi has been on a downswing for much of this year largely on a dovish Reserve Bank of New Zealand, which cut the official cash rate to a record low 1.50 percent last month.
Liquidity was light on Monday due to a public holiday in New Zealand. (Editing by Sam Holmes)