Aussie Falls Toward Two-Week Low Amid 62% Chance of RBA Rate Cut

The Australian dollar traded 0.2 percent from a two-week low before the Reserve Bank meets today as traders bet on a 62 percent chance of an interest-rate cut.

The nation’s currency declined against its 11 of its 16 major peers as Australia’s two-year bond yield premium over that in the U.S. fell to its lowest since Nov. 1 last week. The median forecast of 29 economists is for the central bank to keep rates unchanged at 3 percent. The Aussie fell against the yen as a report showed house prices rose less than forecast, missing the estimates of all 16 economists surveyed by Bloomberg News.

“If the RBA cuts today, we’ll see a pretty big reaction in the currency with everyone pretty much sitting on the fence,” said David Greene, a senior corporate currency dealer at Western Union Business Solutions, a global payment services network. “We don’t think the RBA will cut as the economy seems to be going okay.”

The Australian dollar fell 0.2 percent to $1.0238 as of 2:03 p.m. in Sydney from $1.0254 yesterday, when it touched $1.0222, matching the least since April 23. It slid 0.5 percent to 101.39 yen. New Zealand’s dollar was little changed at 85.17 U.S. cents. The currency fell 0.3 percent to 84.35 yen.

The Aussie will find support at $1.0160 and then $1.01, said Greene. Sellers are probably clustered toward the $1.0320 level, he said. Support refers to an area on a chart where analysts anticipate orders to buy are concentrated.

Aussie Bounce

An index of house prices in Australia rose 0.1 percent in the first quarter, compared with the median forecast for a 1.8 percent gain, according to figures released by the statistics bureau. A separate report showed that the nation had a trade surplus of A$307 million ($314 million) in March, the first since December 2011.

“They are still going to hold rates at 3 percent and we think that the Aussie will probably bounce at the decision,” said Alvin Pontoh, a Singapore-based Asia-Pacific strategist at TD Securities Inc. “They’ll have to acknowledge the somewhat weaker external environment that we’ve seen in the past month. Whether or not they downgrade their assessment is debatable.”

The RBA is due to announce its rate decision at 2:30 p.m. in Sydney. There is a 62 percent chance that the central bank will lower borrowing costs, according to Bloomberg calculations based on overnight-index swap rates.

Australia’s two-year bond yield advantage over the U.S. was at 2.31 percentage point today after touching 2.28 on May 3, the least since Nov. 1.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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

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