Bloomberg News

Australian Dollar Weakens Amid Revised Inflation Calculations

September 14, 2011

Sept. 14 (Bloomberg) -- The Australian currency dropped to a one-month low against the dollar as a revised method of calculating inflation made it less likely the central bank will raise interest rates.

The Aussie sank against the majority of its most-traded counterparts after Australia’s bureau of statistics released its methodology for calculating seasonally adjusted inflation that indicated the central bank’s core measures may have been lower last quarter. The New Zealand dollar slid for a fourth day against the yen as U.S. retail sales stagnated.

The revised methodology means the Reserve Bank of Australia will likely have to reduce its CPI forecast for the June- December period, Joaquin Vespignani, an economist in Sydney at Barclays Plc, wrote in a research note today. “This implies the RBA will have more reason to keep monetary policy unchanged for the rest of this year.”

The Australian dollar fell as much as 1.3 percent to $1.0178, its weakest level since Aug. 11, before trading at $1.0226 at 12:21 p.m. in New York from $1.0312 yesterday. The Aussie slid 1.2 percent to 78.44 yen, from 79.35.

New Zealand’s currency declined 0.2 percent to 82.11 U.S. cents from 82.29 cents and slipped 0.6 percent to 62.97 yen from 63.33 yen.

New Settings

Under the updated settings, the trimmed mean consumer price index rose 0.7 percent in the second quarter and the weighted mean advanced 0.5 percent, the bureau said. It reported July 27 the trimmed mean and weighted median each increased at a 0.9 percent quarterly pace.

Traders are betting the RBA will cut its benchmark interest rate by 155 basis points in the next 12 months, up from 140 basis points yesterday, according to a Credit Suisse Index based on swaps.

The Reserve Bank of New Zealand will hold a policy meeting tomorrow. The central bank will leave its official cash rate unchanged at 2.5 percent, all 15 economists surveyed by Bloomberg forecast.

The Australian dollar has lost 2.4 percent this year, the second-worst performance after the Swedish krona, which fell 2.8 percent, among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Currency indexes.

--With assistance from Mariko Ishikawa in Tokyo. Editors: Paul Cox, Greg Storey

To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Allison Bennett in New York at abennett23@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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