Australia’s dollar slid versus all of its 16 major peers after retail sales in the nation unexpectedly dropped, boosting the case for the Reserve Bank to lower borrowing costs to support growth.
The so-called Aussie headed for its biggest monthly decline since September against the greenback as Australia’s 10- and three-year yields tumbled to records. New Zealand’s dollar, known as the kiwi, fell versus its U.S. and Japanese peers after building permits in the country dropped in April. Both South Pacific currencies also slid as Asian stocks retreated.
The retail data were “certainly worse than expected,” said Callum Henderson, global head of currency research at Standard Chartered Plc in Singapore. “The market is in risk-off mode and, as such, is continuing to look to sell into rallies in the higher-yielding currencies including the Aussie.”
Australia’s dollar fell 0.5 percent to 98.01 U.S. cents as of 4:56 p.m. in Sydney. It lost 0.6 percent to 77.85 yen. New Zealand’s currency declined 0.3 percent to 76.07 cents. It dropped 0.4 percent to 60.43 yen.
The kiwi has dropped 7.1 percent versus the greenback since April 30, the worst performance among 16 major counterparts of the U.S. dollar, according to data compiled by Bloomberg. The Aussie has fallen 6.1 percent, poised for its biggest slide in eight months.
Australian bonds rose, pushing the 10-year yield down by as much as eight basis points, or 0.08 percentage point, to a record 3.057 percent. The three-year yield touched 2.273 percent, the least in data compiled by Bloomberg going back to 1990. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, climbed three basis points to 2.52 percent.
The MSCI Asia Pacific Index (MXAP) of shares lost 0.8 percent, snapping a two-day advance.
Retail sales in Australia declined 0.2 percent in April from a month earlier, after a revised 1.1 percent advance in March, the Bureau of Statistics said today. The median prediction in a Bloomberg News survey was for a 0.2 percent climb.
Twenty five of 28 economists in a separate poll predict RBA Governor Glenn Stevens will hold the overnight cash rate target at 3.75 percent at the next central bank meeting on June 5. Interest-rate swaps data compiled by Bloomberg show traders are certain policy makers will reduce the benchmark next week, with a better than 30 percent chance they will lower it to 3.25 percent.
‘Overpriced for Easing’
“Upside lies ahead as the markets are overpriced for easing,” Annette Beacher, Singapore-based head of Asia-Pacific research at TD Securities, wrote in a note today. “We believe the Australian dollar is oversold and we favor our parity to $1.04 trading range.”
The Aussie’s relative strength index versus the dollar was at 33, near the 30-level that some traders see as an indication that an asset may be oversold and has fallen too quickly. The kiwi’s RSI against the greenback was at 35.3.
In New Zealand, home building approvals declined 7.2 percent in April from a month earlier after a revised 19.6 percent gain in March. Forecasters in a Bloomberg poll predicted a 10 percent drop.
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