BLBG:Australian Dollar Rises After RBA Decision As Asian Stocks Gain
Australia’s dollar climbed versus the U.S. currency after the Reserve Bank lowered borrowing costs less than swap rates had indicated.
The so-called Aussie gained after the central bank cut the overnight cash-rate target by 25 basis points, or 0.25 percentage point, to 3.5 percent. Swaps data compiled by Bloomberg had shown a more than 40 percent chance of a reduction to 3.25 percent before the Reserve Bank of Australia made its announcement today. The New Zealand dollar remained higher following an advance yesterday as Asian stocks rose, boosting demand for higher-yielding assets.
“The market expected slightly more than 25, and the RBA cut only 25, so I think it’s caused short-covering,” said Roy Teo, a currency strategist in Singapore at ABN Amro Private Bank, referring to the scale of reduction anticipated by investors. “For the short term, I’d start to be positioned for some buying in anticipation of a relief rally” for the Australian dollar.
The Aussie climbed 0.6 percent to 97.84 U.S. cents as of 3:23 p.m. in Sydney. It slid to an eight-month low of 95.82 last week. The New Zealand dollar rose 0.3 percent to 75.84 U.S. cents.
The MSCI Asia Pacific Index (MXAP) of stocks advanced 1.4 percent, halting a four-day slide.
Economists were divided in their predictions before today’s RBA decision. Of the 27 surveyed by Bloomberg News, 13 expected a 25 basis point cut, four predicted a 50 basis point reduction and 10 estimated the central bank would leave borrowing costs unchanged.
To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
