Feb. 10 (Bloomberg) -- Australia’s dollar fell for the first week since December after the Reserve Bank lowered its forecasts for growth and inflation this year, boosting scope for policy makers to reduce interest rates.
The so-called Aussie weakened against most of its peers after the central bank said it sees the economy expanding 3.5 percent in 2012, down from its Nov. 4 estimate of 4 percent. The New Zealand dollar, nicknamed the kiwi, extended a weekly drop as European finance ministers withheld an aid package necessary to prevent the Greek economy from collapsing.
“The RBA still has an easing bias, and that is reflected in them revising down their growth forecasts,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. The scale-back of half a percentage point is “a pretty huge move,” weighing on the Aussie, he said.
Australia’s dollar slid 1 percent to $1.0675 at 12:16 p.m. New York time. It reached $1.0845 on Feb. 8, the strongest since Aug. 2. It lost 1.1 percent to 82.85 yen.
The kiwi dropped 0.7 percent to 82.81 U.S. cents and slipped 0.8 percent to 64.26 yen.
The Australian currency has declined 0.9 percent against the greenback since Feb. 3, the first five-day drop in eight weeks. The kiwi has weakened 0.9 percent in the period.
“Inflation is forecast to remain around the midpoint of the target range for most of the next couple of years,” Australia’s central bank said today in its quarterly monetary policy statement. The outlook for consumer prices provides “scope for easier monetary policy should demand conditions weaken materially,” it said.
Consumer prices will rise 3 percent in the year through to the fourth quarter, less than a previous prediction of 3.25 percent, the central bank also said, while its forecast for underlying inflation was unchanged at 2.75 percent. The estimates are based on the overnight cash rate target remaining at its current level of 4.25 percent, it said.
The Australian dollar has risen 1.2 over the past month, according to Bloomberg Correlation-Weight Indexes, which track 10 developed-nation currencies. New Zealand’s dollar has strengthened 1.9 percent, the best performance, while the greenback is down 3 percent.
Greece is missing its debt-cutting targets and may fall short of its intended debt-to-gross-domestic product ratio, German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin today, according to two people who took part in the meeting.
Refused to Approve
Greek Finance Minister Evangelos Venizelos said his euro- area counterparts refused to approve a 130 billion-euro ($171 billion) aid package because the government fell short of austerity demands. George Karatzaferis, the leader of Greece’s Laos party, said he couldn’t support an accord on cuts in its present form.
“Right here, right now, I don’t want to be joining this risk rally because a positive outcome on Sunday and next week is already largely reflected in the price,” Westpac’s Cavenagh said of Greece’s vote on austerity measures and a meeting of euro-area finance ministers on Feb. 15. “The European debt crisis is by no means over,” he said.
--With assistance from Allison Bennett in New York. Editor: Kenneth Pringle
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