Australian Dollar Trades Near Five-Week High Before RBA Minutes

Australia’s dollar headed for the strongest weekly gain in six months before minutes on March 19 from the Reserve Bank’s latest meeting, when policy makers refrained from cutting interest rates.

The so-called Aussie traded within 0.3 percent of the highest level in more than five weeks versus the greenback as traders scaled back rate-cut bets following a report yesterday showing the biggest job gains in almost 13 years. New Zealand’s currency, nicknamed the kiwi, headed for a weekly loss as the nation’s central bank reiterated its focus on exchange rates.

“The expectation of an RBA rate cut has been pared back quite substantially,” causing a “huge bounce” in the Australian dollar, said Derek Mumford, a director at Rochford Capital, a currency risk-management company in Sydney. “I think the RBA is cautious of cutting too far, too soon.”

The Australian currency slipped 0.1 percent to $1.0371 as of 5:03 p.m. in Sydney from yesterday, when it touched $1.0401, the highest since Feb. 6. It has climbed 1.3 percent this week, the biggest gain since the five days ended Sept. 14 and the best performance among the Group of 10 currencies.

The New Zealand dollar weakened 0.1 percent to 82.13 U.S. cents. For the week, the kiwi was poised to fall 0.1 percent.

Minutes from the Reserve Bank of Australia’s March 5 meeting, due March 19, will give insight into the thinking of policy makers after they left the developed world’s highest benchmark interest rate unchanged for a third-straight time.

Rochford’s Mumford expects the Aussie dollar to rise to $1.0450 in coming weeks.

Yield Surge

Australian bond yields of all maturities surged above the RBA’s 3 percent cash rate for the first time since 2011 yesterday, after the statistics bureau in Sydney said employers boosted positions by 71,500 in February from a month earlier, the biggest gain since July 2000.

Australia’s three-year bond yield fell four basis points today, or 0.04 percentage point, to 3.11 percent. Yesterday it touched 3.18 percent, the highest since April 23. The 10-year yield declined six basis points to 3.62 percent from yesterday, when it touched 3.71 percent, the highest since April 26.

Interest-rate swaps data compiled by Bloomberg show traders see an 87 percent chance the central bank will refrain from cutting the benchmark rate at the next meeting on April 2, up from 78 percent odds last week.

The RBA reduced 1.75 percentage points from the key rate in the 14 months through December.

‘Forecasting Issues’

In New Zealand, the central bank reiterated today it is monitoring exchange rates.

“Currently, monetary policy faces some big forecasting issues,” John McDermott, assistant governor and head of economics at the Reserve Bank of New Zealand, said in a text of a speech in Wellington. “One is the treatment of the exchange rate and its likely future path, which will have substantial effects on the economy.”

McDermott said an interest-rate cut might help inflation return to target sooner.

New Zealand’s central bank left its benchmark interest rate unchanged at a record low of 2.5 percent following a policy meeting yesterday.

“The overvalued New Zealand dollar is undermining profitability,” RBNZ Governor Graeme Wheeler said in a statement after the decision.

To contact the reporters on this story: Kevin Buckland in Tokyo at kbuckland1@bloomberg.net; 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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