Australia’s dollar rallied from its weakest level in almost six weeks after central bank officials refrained from cutting the developed world’s highest benchmark rate, even amid signs the global economy is struggling.
The so-called Aussie rose versus the yen after Reserve Bank of Australia Governor Glenn Stevens said monetary policy “remained appropriate.” Demand for Australia’s currency and its New Zealand counterpart was tempered before reports tomorrow that may show retail sales in the euro area declined and services contracted, adding to evidence that global growth is slowing.
“The RBA is waiting and is on pause for now, which could be one of the reasons why market players are buying back the Aussie a bit,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “It’s a bit of a knee-jerk reaction. But I think it’s still a sell on rallies and the risks are still to the downside.”
Australia’s dollar rose 0.2 percent to $1.0266 at 5:15 p.m. in Sydney after earlier touching $1.0224, the lowest since July 25. It gained 0.5 percent to 80.50 yen after falling to as low as 80.07 yesterday, also the weakest since July 25.
New Zealand’s currency earlier dropped to 79.56 U.S. cents, the least since July 26, before trading at 79.81, 0.1 percent above yesterday’s close. It fetched 62.59 yen from 62.42.
Australia’s 10-year bond yield rose two basis points, or 0.02 percentage point, to close at 3.09 percent. The rate completed a 12-day drop yesterday, the longest stretch of declines since at least 1990, when Bloomberg began compiling daily data. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, climbed three basis points to 2.67 percent.
RBA officials kept the overnight cash-rate target at 3.5 percent for a third meeting today, matching the estimate of all 24 economists surveyed Aug. 31 by Bloomberg News.
“With inflation expected to be consistent with the target and growth close to trend, but with a more subdued international outlook than was the case a few months ago, the stance of monetary policy remained appropriate,” the RBA’s Stevens said in a statement explaining today’s decision.
The South Pacific nation’s current-account deficit narrowed to A$11.8 billion ($12.1 billion) in the three months through June from a revised A$13 billion in the first quarter, the Bureau of Statistics said today. The figure compares with a forecast shortfall of A$12.2 billion in a Bloomberg poll.
The Aussie has fallen 4 percent in the past month, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The New Zealand dollar, nicknamed the kiwi, posted the second-biggest decline, dropping 3.6 percent over the same period.
“The exchange rate has declined over the past month or two, though it has remained higher than might have been expected, given the observed decline in export prices and the weaker global outlook,” Stevens said.
Retail sales in the euro region probably fell 0.2 percent in July after advancing 0.2 percent the previous month, economists in a Bloomberg survey predicted before the European Union’s statistics office releases the figures tomorrow. A final reading due tomorrow of an index based on a survey of purchasing managers in services industries in the currency bloc may confirm a drop to 47.5 in August from 47.9 in July.
Standard Chartered Plc lowered its end-2013 estimate for the Australian dollar to 95 U.S. cents from a previous prediction of $1.07. The London-based bank also cut its medium- term weighting for the Aussie to “underweight” from “overweight” and maintained its short-term “neutral” weighting, it said in an e-mailed note to clients today.
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