Bloomberg News

Aussie Reaches 4-Month High Versus U.S. Dollar on RBA Rate Bets

August 06, 2012

The Australian dollar touched a more than four-month high against the greenback on speculation the Reserve Bank of Australia will refrain today from lowering the highest interest rate in the developed world.

The RBA will keep its cash target rate at 3.5 percent, according to the media estimate in a Bloomberg survey of 27 economists. New Zealand’s dollar gained after German Chancellor Angela Merkel’s government supported the European Central Bank’s plan to buy bonds. Commodity prices rose and the Standard & Poor’s 500 Index gained to its highest level since May.

“If rates aren’t changed, and they still signal their rates are appropriate, this could be neutral to slightly positive for the Australian dollar,” Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York, said in a telephone interview. “Not for any particular domestic reason, but because the risk backdrop has improved and, on a relative basis, Australian interest rates are still fairly attractive.”

Australia’s dollar closed little changed yesterday at $1.0569 in New York after touching $1.0593, the highest since March 20. The Aussie declined 0.3 percent to 82.698 yen.

New Zealand’s dollar, nicknamed the kiwi, rose 0.1 percent against its U.S. peer to 82 cents after reaching 82.24 cents, the highest since April 30. The kiwi slipped 0.2 percent to 64.159 yen.

The S&P 500 increased as much as 0.6 percent, and the MSCI World Index of stocks gained up to 0.9 percent to its highest point since May 4. The Thomson Reuters/Jefferies CRB Commodity Index (CRY) rose for a second day.

‘Not Worried’

Merkel’s government is “not worried” by Draghi’s announcement of Aug. 2, deputy Merkel spokesman Georg Streiter told reporters yesterday at a regular press briefing in Berlin, when asked whether the government is concerned that ECB independence might be compromised.

Australia has the highest benchmark borrowing costs among major developed economies. Policy rates in New Zealand, Norway, Sweden, Canada and the euro region range from 0.75 percent to 2.5 percent, while rates in Japan and the U.S. are as low as zero.

Interest-rate swaps data indicate traders see an 84 percent chance RBA policy makers will hold the overnight cash-rate target unchanged tomorrow for a second straight meeting. Of the 27 economists surveyed by Bloomberg News, 26 predict no change while one forecast a reduction to 3.25 percent.

To contact the reporter on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net

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


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