Aussie Trades Near Highest This Month Before Home Loans Data

Australia’s dollar traded near the highest this month ahead of data today that may signal strength in the housing sector as the central bank tries to soften the blow from the peaking of a mining boom.

The currency held its biggest advance in almost two weeks after the Reserve Bank of Australia damped speculation of further cuts to borrowing costs when it reduced its key rate to a record low 2.5 percent yesterday. New Zealand’s kiwi dollar remained higher after a successful milk powder auction reduced concern about a contamination recall in China.

“The RBA has really injected a little bit of uncertainty about the rate outlook, when previously Australian interest-rate markets were fairly certain of one more rate cut,” said Mike Jones, a currency strategist in Wellington at Bank of New Zealand Ltd. “There’s probably a little more upside pressure to come through on the Aussie dollar as the speculative community in particular trims what had been very large short positions,” he said, referring to bets an asset’s price will fall.

The Aussie traded at 89.78 U.S. cents as of 10:08 a.m. in Sydney from 89.85 yesterday, when it rose 0.6 percent and touched 90.05, the highest since July 31. The kiwi was little changed at 79 U.S. cents after climbing 1 percent yesterday. Australia’s currency bought NZ$1.1366 from NZ$1.1373 yesterday.

Home loan approvals in Australia probably rose 2 percent in June, following a 1.8 percent gain in May, according to the median estimate of economists surveyed by Bloomberg News before the statistics bureau’s report today. Data yesterday showed the nation’s home prices rose 5.1 percent in the second quarter from a year earlier, beating analyst estimates.

Housing Sector

Evidence that lower rates and higher prices are having an effect in the housing sector “will sit on the side of the ledger arguing against the RBA feeling the need to provide any further monetary stimulus anytime soon,” National Australia Bank Ltd. analysts, led by Global Head of Research Peter Jolly, wrote in an e-mailed note to clients.

RBA Governor Glenn Stevens said in a statement yesterday following the rate cut that the board “will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the inflation target over time.”

The reduction was the second this year, and extends an easing cycle that began in November 2011, when the benchmark rate was lowered from 4.75 percent.

Record Shorts

Traders held record positions betting on declines in the Aussie versus the U.S. dollar last week, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on a drop compared with those on a gain -- so-called net shorts -- was 72,573 on July 30, compared with shorts of 63,982 a week earlier.

Auckland-based Fonterra Cooperative Group. said whole-milk powder prices for delivery across all contracts through February fell 1.6 percent in an auction today, the first decline in two months.

“What we saw from the auction was basically a vote of confidence in the New Zealand dairy industry, following the turmoil and fears we’ve seen over the past few days,” said BNZ’s Jones.

Fonterra said on Aug. 3 that a dirty pipe in one of its processing plants may have tainted whey protein with a bacteria that causes botulism. The news prompted recalls in China, Vietnam, Sri Lanka, Thailand and New Zealand.

China, New Zealand’s largest trading partner, has imposed a ban on imports of whey powder and another dairy ingredient, threatening export ties. Fonterra said yesterday that no products offered at a GlobalDairyTrade auction of dairy products were subject to trade sanctions.

New Zealand’s unemployment rate rose to 6.4 percent in the second quarter from 6.2 percent in the previous period, official data showed today, as the participation rate advanced to 68 percent from an upwardly revised 67.9 percent.

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

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

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