Bloomberg News

Aussie Declines for a Second Day as Inflation Slows Before RBA

October 31, 2011

Oct. 31 (Bloomberg) -- Australia’s dollar fell versus its U.S. counterpart for a second day amid prospects ebbing price pressures will allow Reserve Bank of Australia Governor Glenn Stevens to cut interest rates at a policy meeting tomorrow.

The loss pared the Aussie’s first monthly gain since July. The Australian and New Zealand dollars both rallied against the yen after Japan intervened to weaken its currency.

“It’s certainly possible that we will see a rate cut from the RBA tomorrow,” said Josephine Heffernan, a senior economist at St. George Bank Ltd. in Sydney. “That could potentially weigh on the Aussie dollar.”

The Australian dollar fell 1.1 percent to $1.0584 at 1:33 p.m. in New York. It appreciated 9.5 percent for the month. The Aussie jumped 1.8 percent to 82.55 yen and touched 83.95, the highest level since Aug. 4, when Japan last intervened in the foreign-exchange market.

New Zealand’s dollar, nicknamed the kiwi, dropped 1.2 percent to 81.09 U.S. cents, gaining 6.5 percent in October. The kiwi rallied 1.6 percent to 63.24 yen and touched 64.58 yen, the highest since Sept. 9.

Stocks and commodities fell as appetite ebbed for higher- yielding assets. The MSCI World Index of equities slumped 2.4 percent and the Thomson Reuters/Jefferies CRB Index of raw materials fell 1.4 percent.

Futures traders see an 80 percent chance of a quarter- percentage-point reduction in the RBA’s 4.75 percent target rate when the central bank policy makers meet.

Consumer Prices

Australia’s consumer prices rose 2.6 percent this month from a year earlier, compared with a 2.8 percent annual gain in September, according to an index compiled by TD Securities Inc. and the Melbourne Institute released in Sydney today. Inflation slowed for a third straight month, the data showed.

Japanese Finance Minister Jun Azumi said the government intervened unilaterally in the foreign-exchange market to halt the yen’s rise after the currency reached a post-World War II high against the dollar earlier today. Central banks intervene by selling or buying currencies to influence prices.

--With assistance from Catarina Saraiva in New York and Ronnie Harui in Singapore. Editors: Greg Storey, Dennis Fitzgerald

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

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


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