Bloomberg News

Australian Dollar Gains for Third Week as Rate-Cut Bets Fall

September 02, 2011

Sept. 2 (Bloomberg) -- Australia’s dollar rose for a third week versus its U.S. counterpart in its longest winning streak since June as investors pared bets the Reserve Bank will cut borrowing costs.

The Aussie traded at almost a one-month high as traders signaled an 80 percent chance that RBA Governor Glenn Stevens will hold the developed world’s highest target lending rate unchanged Sept. 6. New Zealand’s dollar rose for a second week versus the greenback as the world’s largest dairy exporter said it expects to maintain its forecast payout to farmers. Gains in both currencies were tempered after data showed U.S. job growth stagnated last month.

“Markets are just pricing out, to a reasonable degree, an imminent risk of a rate cut, at least for the month of September,” said Darryl Conroy, a financial markets analyst at Suncorp Bank in Brisbane, Australia.

Australia’s dollar fell 0.5 percent to $1.0665 at 12:38 p.m. in New York, paring its weekly advance to 0.9 percent. Yesterday it touched $1.0765, the strongest since Aug. 4. The currency traded 0.7 percent weaker at 81.91 yen, from 82.48 yesterday, for a weekly gain of 1.1 percent.

New Zealand’s dollar, nicknamed the kiwi, slipped 0.2 percent to 84.90 U.S. cents, from 85.08 cents, trimming its weekly gain to 1 percent. It fell 0.4 percent to 65.21 yen, from 65.46, paring a five-day increase to 1.2 percent.

Cash-rate futures show traders reduced to 20 percent the chance of an RBA rate cut this month, from 32 percent Aug. 26.

Rate Bets

Credit Suisse Group AG indexes based on swaps trading show the RBA will reduce its 4.75 percent key rate by 113 basis points, or 1.13 percentage points, over a year, and the Reserve Bank of New Zealand will increase its 2.5 percent benchmark by 48 basis points.

Auckland-based Fonterra Cooperative Group Ltd., the world’s biggest dairy exporter, said it expects to pay its 10,500 farmer shareholders NZ$6.75 ($5.75) per kilogram of milk solids in the year ending May 31, 2012. That matches its forecast in May this year, the company’s highest opening estimate.

Fonterra processes 95 percent of New Zealand’s milk and generates more than 20 percent of the nation’s annual export earnings, according to its website.

The Aussie and kiwi erased gains today as demand for higher-yielding assets fell after a government report showed U.S. payrolls were unchanged last month, the weakest reading in almost a year. They added 85,000 jobs in July, fewer than initially estimated. The median forecast in a Bloomberg News survey called for a rise of 68,000 last month.

--With assistance from Allison Bennett in New York and Kristine Aquino in Singapore. Editors: Greg Storey, Dennis Fitzgerald

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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


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