BLBG:Aussie Dollar Falls From Near 6-Month High After RBA Cuts Growth Forecasts
Australia’s dollar fell from near a six-month high after the Reserve Bank lowered its forecasts for growth and inflation this year, boosting scope for policy makers to reduce interest rates.
The so-called Aussie weakened against most of its peers after the central bank said it sees the economy expanding 3.5 percent in 2012, down from its Nov. 4 estimate of 4 percent. The New Zealand dollar, nicknamed the kiwi, extended a weekly drop before Greek lawmakers start to vote on austerity measures required to secure a second bailout package. Losses in the South Pacific nations’ currencies were limited amid signs of recovery in the U.S.
“The RBA still has an easing bias, and that is reflected in them revising down their growth forecasts,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. The scaleback of half a percentage point is “a pretty huge move,” weighing on the Aussie, he said.
Australia’s dollar slid 0.7 percent to $1.0714 at 4:13 p.m. in Sydney, after reaching $1.0845 on Feb. 8, the most since Aug. 2. It lost 0.7 percent to 83.18 yen. The kiwi dropped 0.4 percent to 83.06 U.S. cents and slipped 0.4 percent to 64.50 yen.
The Australian currency has declined 0.5 percent against the greenback since Feb. 3, poised for the first five-day drop in eight weeks. The kiwi has weakened 0.6 percent in the period.
“Inflation is forecast to remain around the midpoint of the target range for most of the next couple of years,” Australia’s central bank said today in its quarterly monetary policy statement. The outlook for consumer prices provides “scope for easier monetary policy should demand conditions weaken materially,” it said.
Consumer Prices
Consumer prices will rise 3 percent in the year through to the fourth quarter, less than a previous prediction of 3.25 percent, the central bank also said, while its forecast for underlying inflation was unchanged at 2.75 percent. The estimates are based on the overnight cash rate target remaining at its current level of 4.25 percent, it said.
Greek Prime Minister Lucas Papademos said yesterday his government has reached “a general agreement,” on an austerity package required to receive a 130 billion-euro ($173 billion) rescue from the so-called troika of lenders, according to a statement from his press office.
Greek lawmakers are set to convene this weekend to begin voting on the austerity measures, Christos Protopapas, a spokesman for the Pasok socialist party, said yesterday. An implementation law will be considered in the next 10 to 15 days, he said.
Greek Austerity Plan
The troika is comprised by the European Commission, European Central Bank and International Monetary Fund. Luxembourg Prime Minister Jean-Claude Juncker said in Brussels late yesterday that there would be no disbursement of funds without Greece’s implementation of an austerity plan.
The Australian dollar has risen 1.2 over the past month, according to Bloomberg correlation-Weight Indexes, which track 10 developed-nation currencies. New Zealand’s dollar has strengthened 1.9 percent, the best performance, while the greenback is down 3 percent.
“Right here, right now, I don’t want to be joining this risk rally because a positive outcome on Sunday and next week is already largely reflected in the price,” Westpac’s Cavenagh said of Greece’s vote on austerity measures and a meeting of euro-area finance ministers on Feb. 15. “The European debt crisis is by no means over,” he said.
U.S. Recovery
Demand for the South Pacific nations’ currencies was supported amid data that point to a recovery in the U.S. economy.
U.S. applications for jobless benefits decreased 15,000 in the week ended Feb. 4 to 358,000, Labor Department figures showed yesterday in Washington. That compared with economists’ estimates for 370,000 claims. The Thomson Reuters/University of Michigan preliminary consumer sentiment index for February was at 74.8, hovering around January’s one-year high of 75, economists in the Bloomberg News survey forecast ahead of today’s data.
“We’ve been getting good numbers out of the U.S.,” said Takuya Kawabata, a researcher at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency-margin company.“That’s supportive of risk currencies such as the Aussie and kiwi.”
Australian government bonds snapped four days of declines, pushing the yield on the 10-year security down five basis points, or 0.05 percentage point, to 4.0 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to interest-rate expectations, decreased six basis points to 2.89 percent.
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net;
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
