Bloomberg News

Australian Dollar Drops From 12-Week High Before Inflation Data

January 24, 2012

Jan. 24 (Bloomberg) -- Australia’s dollar declined from the highest level in 12 weeks on speculation a report tomorrow will show gains in consumer prices are slowing, providing scope for the nation’s central bank to cut interest rates.

The New Zealand dollar halted a two-day advance amid forecasts the Reserve Bank of New Zealand will keep interest rates at a record low at a policy meeting this week. The South Pacific nations’ currencies extended losses as European policy makers and Greek bondholders failed to reach an agreement on a debt-swap plan for the indebted nation, reducing risk appetite.

“Without the pressure of inflation, interest rates have scope to come down,” said Derek Mumford, a director in Sydney at Rochford Capital, a currency-risk management company. “I think the RBNZ will adjust their rhetoric to suggest that they will cut rates if needed. It could take a little bit of edge off” the New Zealand dollar, he said.

Australia’s dollar declined 0.6 percent to $1.0462 at 11:07 a.m. in New York after yesterday touching $1.0573, the highest since Oct. 31. The so-called Aussie also rose 0.3 percent to 81.30 yen, rising for a sixth day.

New Zealand’s dollar dropped 0.2 percent to 80.86 U.S. cents from 81.01 yesterday, when it reached 81.42, also the highest since Oct. 31. It strengthened 0.7 percent to 62.84 yen.

Australia’s consumer prices climbed 0.2 percent in the fourth quarter from the previous three-month period, according to economists surveyed by Bloomberg News before the Bureau of Statistics report tomorrow. That compares with a 0.6 percent gain in the third quarter.

Consumer Prices

An index of Australian leading economic indicators fell 0.3 percent to 128 in November, the New York-based Conference Board said in an e-mailed statement today. That follows a revised increase of 0.5 percent the previous month.

A Statistics New Zealand report on Jan. 19 showed consumer prices in the country declined 0.3 percent in the fourth quarter from the previous three-month period, when they advanced 0.4 percent. All 14 economists surveyed by Bloomberg forecast the RBNZ to keep interest rates unchanged at 2.5 percent at the policy meeting on Jan. 26.

European finance ministers meeting in Brussels signaled they would push Greece’s private investors to accept bigger losses after Charles Dallara, managing director of the Institute of International Finance, made what he described as the bondholders’ “maximum” offer. Euro-area governments are seeking to fill a deeper-than-expected hole in Greece’s finances by saddling investors with a lower interest rate on exchanged bonds, setting up a confrontation before a European Union summit on Jan. 30.

--With assistance from Catarina Saraiva in New York. Editors: Kenneth Pringle, Paul Cox

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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