Aussie Holds 3-Day Drop on RBA Bets Before Price Report

Australia’s dollar held a three-day loss ahead of consumer price data tomorrow that may show inflation held near the slowest since 1999, providing scope for the Reserve Bank to cut interest rates.

The so-called Aussie and New Zealand’s currency erased early gains against the greenback as Asian shares turned lower, damping demand for higher-yielding assets. Both touched one- month highs against the yen on speculation the Bank of Japan (8301) will ease monetary policy as early as this month.

“Expectations are that the RBA is going to cut rates again,” said Eric Viloria, senior currency strategist at Gain Capital Group LLC in New York. The prices report tomorrow “could reinforce expectations of a rate cut, and that should weigh on the Aussie.”

The so-called Aussie was little changed at $1.0324 as of 4:41 p.m. in Sydney after losing 0.6 percent in the previous three sessions. The New Zealand dollar slid 0.1 percent to 81.69 U.S. cents, trimming a 0.3 percent gain yesterday.

The Australian dollar earlier reached as high as 82.71 yen while the kiwi touched 65.47 yen, both the highest levels since Sept. 19. The MSCI Asia Pacific Index of shares slipped 0.3 percent, set for a third-straight loss.

The so-called trimmed mean gauge of core consumer prices in Australia probably rose 2.2 percent in the three months ended Sept. 30 from a year earlier, a Bloomberg News survey of economists showed. That compares with a 2 percent increase in the previous quarter, the slowest pace since June 1999.

Mining Boom

The Reserve Bank of Australia, which targets average annual inflation of 2 percent to 3 percent, reduced the overnight cash rate target by a quarter percentage point to 3.25 percent on Oct. 2.

Overnight-index swaps data compiled by Bloomberg show traders see a 99.6 percent chance policy makers will lower the rate further to 3 percent at their next meeting on Nov. 6.

Heather Ridout, an RBA board member, said today that Australia’s mining boom has become softer though it isn’t over. Monetary policy hasn’t lost its teeth, Ridout said at a conference in Sydney.

Australia expects to issue A$45 billion ($46 billion) of bonds in 2012-2013, an increase of A$10 billion from the amount predicted at the time of the May budget, the Australian Office of Financial Management said in an e-mailed statement today.

The nation’s government bonds fell, with the 10-year yield rising four basis points to 3.18 percent. It gained to 3.24 percent last week, the highest since Sept. 24.

Monetary Policy

New Zealand’s central bank will probably leave the official cash rate at a record low of 2.5 percent at a meeting this week, economists forecast.

The country plans to sell at least NZ$1 billion ($817 million) in inflation-linked debt by syndication. The 2 percent September 2025 security is expected to be priced “in the near future, subject to market conditions,” sale manager UBS AG said in an e-mailed statement.

In Japan, government data due Oct. 26 will probably show that consumer prices excluding fresh food declined in September for a fifth-straight month, according the median estimate of economists gathered by Bloomberg. That’s far short of the central bank’s goal for inflation of 1 percent. The BOJ will hold a policy meeting on Oct. 30.

“Because of higher yields, Australia’s dollar is still preferred over the yen,” said Takuya Kawabata, a researcher at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency margin company.

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net

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

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