BLBG: Australian Dollar Is Near Two-Week Low as Minutes Say Consumers Cautious
The Australian dollar traded near a more than two-week low after minutes of the central bank’s meeting this month said its decision to raise interest rates was “finely balanced,” damping prospects for further increases.
The so-called Aussie declined against 15 of its 16 most- traded counterparts as Reserve Bank of Australia policy makers said a “modest tightening” was considered prudent when they increased the benchmark rate by a quarter percentage point on Nov. 2. New Zealand’s currency failed to gain for a fourth day as Asian stocks fell on speculation the governments will take further steps to cool inflation.
“The market will take the view that RBA is going to sit back and wait until February,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “There are bets toward the Australian currency falling with the U.S. dollar strengthening broadly.”
Australia’s currency traded at 98.52 U.S. cents as of 4:55 p.m. in Sydney from 98.53 cents in New York yesterday when it touched 98.13 cents, the least since Oct. 29. The currency was at 81.68 yen from 81.85 yen.
New Zealand’s dollar fetched 77.25 U.S. cents from 77.29 U.S. cents in New York yesterday. The currency bought 64.07 yen from 64.20 yen.
Benchmark interest rates are 4.75 percent in Australia and 3 percent in New Zealand, compared with as low as zero in the U.S. and Japan, attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
Swap traders are betting the RBA will keep its official cash rate unchanged at its next meeting on Dec. 7, before raising it by 43 basis points over the next year, according to an index compiled by Credit Suisse Group AG.
Asia Stocks Fall
Demand for the South Pacific nations’ currencies fell as signs Asian governments will take further steps to curb inflation spurred declines in regional shares. The Bank of Korea today raised the benchmark interest rate by 0.25 percentage point to 2.5 percent.
China may impose price limits on food and toughen punishment on those found speculating on agriculture futures, the Securities Journal said, citing an unidentified person. The 21st Century Business Herald reported that China may adjust its economic policies for 2011 on increasing inflation pressure.
The MSCI Asia Pacific Index of regional shares fell 0.2 percent while the Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, plunged 3.5 percent. China is Australia’s largest trading partner and New Zealand’s second- biggest export market.
Buying Target
The Australian dollar may be a short-term buying target as it weakens amid strong U.S. data, said Roland Randall, a senior strategist at TD Securities Inc. in Singapore.
“We could see it back up toward parity within a week or two,” Randall said. “The RBA sees steadily rising inflationary pressures and they’ve highlighted a modest tightening of monetary policy which probably means one rate hike every quarter next year.”
U.S. industrial production increased 0.3 percent last month after dropping 0.2 percent in September, according to a Bloomberg News survey before today’s report. Retail sales rose 1.2 percent in October, the most in seven months, Commerce Department data showed yesterday.
Australian bonds were little changed, with the yield on the benchmark 10-year note at 5.41 percent, according to data compiled by Bloomberg.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
