The so-called Aussie fell to a three-week low against the greenback as swaps indicate a 86 percent chance the RBA will cut interest rates by 25 basis points. New Zealand’s dollar, the kiwi, weakened as global stock losses damped demand for riskier assets. Declines in the South Pacific currencies were limited as a gauge showing a contraction in China’s manufacturing added to speculation the nation will expand stimulus.
“The stage is set for a few days of volatility in the Aussie dollar,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “We’re looking for the RBA to ease monetary policy over the next six months. They could choose to get ahead of the curve by cutting tomorrow.”
Australia’s currency touched NZ$1.2469, the lowest since September 2011, before trading at NZ$1.2501 as of 4:15 p.m. in Sydney, little changed from the close on Sept. 28. The Aussie fell 0.3 percent to $1.0348 from the end of last week, after touching $1.0326, the lowest since Sept. 11. It lost 0.4 percent to 80.58 yen.
The New Zealand dollar slid 0.3 percent to 82.78 U.S. cents and weakened 0.4 percent to 64.46 yen.
The MSCI Asia Pacific Index (MXAP) fell 0.5 percent, following a 2 percent decline in the MSCI World Index (MXWO) last week. The Australian Stock Exchange operated normal hours today, while much of the country was closed for a public holiday.
Australian government bonds were little changed with 10- year yields at 2.97 percent.
A private gauge today showed Australian manufacturing contracted at a faster pace in September as employment fell and new orders shrank for a seventh month. The manufacturing index fell to 44.1 from 45.3 in August, the Australian Industry Group and PricewaterhouseCoopers said in a survey released today. A reading below 50 indicates a contraction.
Consumer prices rose 2.4 percent last month from a year earlier, an index compiled by TD Securities Inc. and the Melbourne Institute released in Sydney today showed. That is near the middle of the RBA’s 2 percent to 3 percent target.
In China, a purchasing managers’ index of manufacturing was at 49.8 in September, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today. The median estimate of economists surveyed by Bloomberg was for a rise to 50.1. China is Australia’s biggest trading partner and New Zealand’s second-largest export market.
“We’d expect the reserve requirements to be going down,” Richard Jerram, chief economist at Bank of Singapore Ltd. said in an interview on Bloomberg Television. A cut in the reserve requirement ratio “seems to be long overdue.”
China’s money-market rate on Sept. 28 completed the biggest weekly drop in 11 months after the nation’s central bank added a record amount of funds to the financial system.
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