Fear of AAA loss a weight on Aussie Dollar
News that China's navy seized a US drone in international waters in the South China Sea drove geopolitical concerns, weighing on the US stockmarket.
The Dow was unchanged, while the S&P 500 fell 0.2% and the Nasdaq dropped 0.4% for the session.
The US 10-year treasury yield ranged sideways before finishing down 1 basis point at 2.59%. The 2-year bond yield fell 2 basis points, to 1.25%.
Fed hawk Lacker (who is a voter in 2018) commented that more than three hikes may be needed in 2017.
The US dollar index (weighted against a basket of currencies) drifted lower on Friday.
The US dollar weakened against the Yen on reports China had seized a US drone. USD/JPY fell abruptly from 118.43 to 117.47, then partially recovered to trade around 117.96 at the time of writing.
The Euro edged higher, with EUR/USD ranging between 1.0400 and 1.0475.
Increased risk aversion weighed on the Aussie dollar. AUD/USD fell from 0.7369 to a six-month low of 0.7266 but managed to recover to 0.7300 near the close.
Concerns today's mid-year economic and fiscal outlook (the MYEFO) could to lead to a downgrade of Australia's AAA sovereign debt rating may also have weighed on the currency.
NZD/USD similarly fell from 0.7050 to a six month-low of 0.6931.
The copper price fell after two days of gains, on rising copper inventories and concerns about demand from China.
There was no major economic data released on Friday.
CPI inflation fell by 0.1% in November, in line with consensus forecasts. For the year to November, CPI inflation rose by 0.6%, up from 0.5% in the year to October.
Core CPI rose by 0.8% in November. It has held at this annual pace for four consecutive months.
Consumer confidence fell to 124.5 in December, from 127.2 in November, according to the ANZ measure.
Housing starts were weaker than expected, falling from a nine-year high reached in October. In November, housing starts fell by 18.7%, following an upwardly revised increase of 27.4% in October.
Building permits were also undershot consensus expectations, falling by 4.7% in November, after rising by 2.9% in October.
Permits for single-family homes, however, rose to a nine-year high in November.