The Australian dollar traded 0.4 percent from a 2 1/2-year low versus its New Zealand peer before minutes of the Reserve Bank of Australia’s meeting this month are released tomorrow amid prospects of lower borrowing costs.
The so-called Aussie slid for a third day against its U.S. peer as interest-rate swaps data compiled by Bloomberg show traders are predicting RBA Governor Glenn Stevens will cut his nation’s key rate to a record low this year. New Zealand’s dollar, known as the kiwi, climbed versus the yen after a report showed the nation’s service industries expanded at a faster pace. Demand for both South Pacific currencies was damped after growth slowed in Chinese New Year holiday retail sales.
“The Aussie has been in a downtrend since January,” said Greg Gibbs, a Singapore-based senior currency strategist at Royal Bank of Scotland Group Plc. “The market is looking more at fundamentals now, and the Australian economy is weakening.”
Australia’s dollar bought NZ$1.2198 as of 5:07 p.m. in Sydney after it touched NZ$1.2143 on Feb. 15, the weakest since July 2010. It slid 0.1 percent to $1.0294 and gained 0.4 percent to 96.73 yen. New Zealand’s currency bought 84.39 U.S. cents from 84.51 at the end of last week. It rose 0.4 percent to 79.30 yen.
Australia’s inflation outlook “would afford scope to ease policy further, should that be necessary to support demand,” Stevens said in a statement on Feb. 5 after he and his board kept the cash rate target at 3 percent.
Swaps data show traders see a 75 percent chance the RBA will reduce the rate to at least 2.75 percent by the June 4 policy meeting, which would take it to the lowest level in the central bank’s 53-year history.
The difference in the number of wagers on a rise in the Australian dollar compared with those on a decline -- so-called net longs -- dropped to 54,114 in the week through Feb. 12, figures from the Washington-based Commodity Futures Trading Commission showed. That’s the least since the period through Oct. 30.
Shop and restaurant sales during the week-long Lunar New Year festival in China, Australia’s largest trading partner and New Zealand’s second-biggest export destination, increased at the slowest pace in four years, according to a statement posted Feb. 15 on the Ministry of Commerce’s website.
In New Zealand, the Performance of Services Index rose to 52.6 in January from 51.5 the previous month, according to a report today by Bank of New Zealand Ltd. and Business NZ.
The Aussie and kiwi offer the best trading opportunity against the yen, according to Todd Elmer, head of Group of 10 foreign-exchange strategy for Asia excluding Japan at Citigroup Inc. in Singapore. “It’s very tough for governments like Australia, for New Zealand to keep pace” with the Bank of Japan, he said in an interview on Bloomberg Television today. “They’re not going to be comfortable with the domestic impact of easier policy.”
The yen weakened against all its major counterparts after Japan escaped censure from Group of 20 finance ministers and central bankers. Two days of talks ended in Moscow Feb. 16 with a statement pledging not to “target our exchange rates for competitive purposes,” without singling out Japan. Japanese officials denied driving down their currency, saying its decline was a byproduct of their effort to revive the economy.
Australia’s 10-year yield climbed four basis points, or 0.04 percentage point, to 3.56 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates that are sensitive to expectations for borrowing costs, added two basis points to 3.05 percent.
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