Bloomberg News

Aussie Weakens Versus Most Peers as Central Bank Holds Rates

June 07, 2011

June 7 (Bloomberg) -- Australia’s dollar dropped against the majority of its most-traded counterparts after the central bank held interest rates unchanged and said current policy settings are appropriate.

The Aussie fell versus the currencies of other commodity exporters including New Zealand and Canada after Reserve Bank of Australia Governor Glenn Stevens said the decision reflected “softened” prices for raw materials and a jobless rate that’s been little changed at almost 5 percent. New Zealand’s dollar rose as speculation eased that Europe’s debt crisis will worsen, boosting demand for higher-yielding assets.

The RBA statement “sounded a little bit more downbeat than expected,” said Mitul Kotecha, head of global foreign-exchange strategy in Hong Kong at Credit Agricole SA. “Gains for the Aussie dollar will be more difficult in the months ahead.”

Australia’s dollar fell 0.7 percent to NZ$1.3056 at 11:36 a.m. in New York, from NZ$1.3151 yesterday. It was little changed against the greenback at $1.0706, and gained less than 0.1 percent to 85.86 yen, from 85.81. The Aussie fell 0.7 percent versus Canada’s dollar to C$1.0440.

New Zealand’s dollar, nicknamed the kiwi, appreciated 0.7 percent to 81.98 U.S. cents, from 81.45. It touched a record 82.64 U.S. cents on May 31. The kiwi advanced 0.8 percent to 65.76 yen, from 65.24.

The Australian central bank kept the overnight cash rate target at 4.75 percent, as forecast by 23 of 28 economists surveyed by Bloomberg News. Five had predicted a quarter percentage-point increase.

Rate Bets Lowered

Swaps traders are betting the RBA will raise the rate by 20 basis points over the next 12 months, down from a forecast yesterday of 26 basis points, a Credit Suisse Group AG index showed. A basis point is 0.01 percentage point.

The kiwi rose after the European Central Bank President Jean-Claude Trichet yesterday gave his first signal that he endorses encouraging investors to buy new Greek bonds to replace maturing securities, potentially making the euro region’s sovereign-debt situation more sustainable.

--With assistance from Allison Bennett in New York. Editors: Greg Storey, Dave Liedtka

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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