Bloomberg News

Aussie Falls, Bonds Rise After RBA Says Currency May Extend Drop

July 01, 2013

Australia’s dollar held its biggest gain in more than two weeks versus the greenback as global stocks rallied ahead of central bank policy meeting today.

Traders see a 79 percent chance the Reserve Bank of Australia will refrain from cutting interest rates today. Governor Glenn Stevens signaled at the last meeting on June 4 there is still room to reduce borrowing costs and the local dollar remained high. The Aussie traded near the lowest in 4 1/2 years against its New Zealand counterpart.

“The RBA said last time the exchange rate remained high considering the decline in export prices, so it will be interesting to see whether they will simply reiterate that message or dilute that message somewhat,” said Alvin Pontoh, a Singapore-based Asia-Pacific strategist at TD Securities Inc. “If they refrain from saying anything about the currency, then the currency will bounce because that will be interpreted as the RBA as being happy with the current exchange rate.”

The Australian dollar was little changed at 92.40 U.S. cents as of 10:10 a.m. in Sydney from yesterday, when it gained 1.1 percent, the biggest increase since June 13. The same day it touched 91.10, the lowest since September 2010.

The Aussie was unchanged at NZ$1.1813. It dropped to NZ$1.1753 on June 20, a level unseen since January 2009. Australia’s currency bought 92.01 yen from 92.08 yesterday, when it climbed 1.6 percent.

New Zealand’s dollar was little changed at 78.20 U.S. cents, after yesterday rising 1.1 percent. It slid 0.1 percent to 77.85 yen.

The yield on Australia’s 10-year government bond slid four basis points, or 0.04 percentage point, to 3.78 percent. The MSCI World Index of stocks gained 0.8 percent yesterday, while the Standard & Poor’s 500 Index (SPX) of U.S. shares added 0.5 percent. MSCI’s Asia Pacific Index added 0.7 percent today.

December Odds

Twenty-five of 28 economists surveyed by Bloomberg News expect Governor Stevens and his policy board to hold the Australia’s benchmark interest rate at 2.75 percent today. Interest-rate swaps data compiled by Bloomberg show traders see a 84 percent chance of a reduction by December.

“The exchange rate has depreciated since the previous board meeting, although, as the board has noted for some time, it remains high considering the decline in export prices that has taken place over the past year and a half,” Stevens said on June 4, after unexpectedly lowering borrowing costs in May.

ANZ Bank New Zealand Ltd. releases monthly price index of New Zealand’s commodity exports for June at 1 p.m. in Wellington. The RBA price index of Australian commodities dropped 10.5 percent from a year earlier to 88.9 last month from a revised 87.4 in May, data released on its website yesterday showed.

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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