Aussie Approaches Least in Almost 3 Years Amid RBA Rate Cut Bets The Australian dollar declined, approaching its lowest level in almost three years, as speculation the central bank will cut borrowing costs next week curbed demand for the currency. Yields on shorter-dated Australian government debt fell as traders’ expectations for interest-rate reductions over the next year climbed to the most in 12 weeks. Reserve Bank Governor Glenn Stevens said yesterday the inflation outlook provided room for further policy easing. New Zealand’s dollar declined for a third day before a report tomorrow that may show manufacturing contracted in China. Stevens’s comments “really left the door open for more easing, and those dovish signs give us more confidence in our view that the RBA will cut rates once again,” said Janu Chan, a Sydney-based economist at St. George Bank Ltd. “The Aussie will weaken from here,” said Chan, who sees the currency at 89 cents by year-end. The Aussie fell 0.4 percent to 90.23 U.S. cents as of 10:50 a.m. in Sydney, after dropping to 90.18 cents, the least since July 12. It’s set for a 1 percent drop this month, the most after the Brazilian real among 16 major peers, in the longest string of losses since November 2008. Australia’s one-year bond yield declined to a record 2.25 percent. The rate on government debt due in two years touched 2.3 percent, the least in a year, while the three-year sovereign note yield slid to as low as 2.53 percent, a level unseen since June 11. Of 28 economists surveyed by Bloomberg News, 18 predict the RBA will lower the cash rate by 25 basis points to a record-low 2.5 percent at a meeting on Aug. 6. Traders see a 90 percent chance of a rate cut, up from 75 percent odds seen a week ago, according to swaps data tracked by Bloomberg. Stevens and his board will probably decrease rates by 55 basis points over the next 12 months, the biggest expected reduction since May 7, according to a Credit Suisse Group index based on swaps. That’s the largest cut seen among 10 developed-nation central banks tracked by the bank. A gauge of manufacturing in China, Australia’s biggest trading partner and New Zealand’s second-largest export destination, probably fell to 49.8 in July from 50.1 in June, according to economists surveyed by Bloomberg News before tomorrow’s report. If confirmed, that would be the first reading below 50, the dividing line between expansion and contraction, since September. New Zealand’s kiwi dollar slid 0.4 percent to 79.59 U.S. cents after falling 1.2 percent in the previous two days. The nation’s two-year swap rate, a fixed payment made to receive floating rates that is sensitive to interest-rate expectations, rose two basis points to 3.33 percent.
Posted on: Wed, 31 Jul 2013 01:27:42 +0000
Trending Topics
Recently Viewed Topics
© 2015