TH: Aussie leads commodity currencies higher after RBA holds rates
TOKYO, March 3 — Reserve Bank of Australia Governor Glenn Stevens stepped aside in the global currency wars. The Aussie responded by climbing, dragging with it currencies of commodity- producing nations from Canada to South Africa.
Australia’s dollar rose as much as 1 per cent to 78.42 US cents (RM2.84) after the central bank unexpectedly left the cash rate at a record-low 2.25 per cent Tuesday. A quarter-point reduction was forecast by 18 of 29 economists in a Bloomberg News survey, with swaps traders pricing better than 60 per cent odds of a cut before the decision. The Bloomberg Dollar Spot Index retreated from its highest level since at least 2004.
“There was a strong expectation that the RBA would cut this time around and there was a bit of a surprise when they didn’t,” said Neil Jones, head of hedge fund sales at Mizuho Bank Ltd in London. “The dollar got sold against the commodity currencies, particularly the Aussie.”
The RBA’s decision marked a change of direction for a central bank that was part of a widening group of peers from Denmark to Canada that had added stimulus this year, using measures that sometimes debased the nations’ currencies.
The European Central Bank said it will begin monthly purchases of €60 billion (US$67 billion) of bonds in March, while the People’s Bank of China cut rates February 28, easing monetary conditions for the third time since November. The euro has dropped about 5 per cent against a basket of major currencies in the past three months.
The Aussie rose 0.6 per cent to 78.13 US cents at 10.28am in London. It has rallied more than 2 per cent since touching a 5 1/2-year low of 76.26 cents on February 3, when Stevens trimmed borrowing costs by a quarter-percentage point.
The US dollar weakened 0.3 per cent to ¥119.79 and appreciated 0.1 per cent to US$1.1168 per euro. Japan’s currency advanced 0.4 per cent to ¥133.79 per euro.
Central banks
Stevens cited strong growth in Sydney house prices in announcing the decision leaving borrowing costs at a record low. He also said “further easing of policy may be appropriate over the period ahead,” in the statement on the RBA’s website.
His decision to keep the rate unchanged clashed with a market view nurtured on a slew of data in the past month signalling a turn for the worse for the world’s 12th-largest economy.
Investors anticipating further RBA easing increased bearish wagers on the currency to the most in more than a year at the end of last month. Hedge funds and other large speculators increased the difference in the number of wagers on a decline in the currency against the greenback versus those on a gain to 63,154 in the week through February 24, the most since January 2014, according to the latest data available from the Commodity Futures Trading Commission in Washington.
Dollar move
The Bloomberg Dollar Spot Index retreated 0.1 per cent to 1,175.34, after climbing to 1.176,47 yesterday, the highest close since the gauge started in 2004. The measure advanced 0.4 per cent last month, the slowest pace since it recorded a drop in June.
South Africa’s rand rose for the first time in four days against its US peer, appreciating 0.3 per cent to 11.7369 to the dollar. New Zealand’s dollar jumped 0.3 per cent to 75.34 US cents. The loonie, as Canada’s currency is nicknamed for the image of the aquatic bird on the C$1 coin, strengthened 0.1 per cent to C$1.2521 per US dollar. — Bloomberg
