Australia’s dollar rose to a three-week high on speculation minutes tomorrow of the Reserve Bank’s meeting this month will signal the central bank is in no hurry to cut interest rates.
The Aussie advanced for a fourth day after traders pared bets for further declines in the currency. Australia’s benchmark 10-year (GACGB10) government bond yielded the most in eight weeks. New Zealand’s dollar gained against all of its major peers as traders increased bets borrowing costs will rise.
“It was very helpful for the Aussie that the RBA sounded more neutral in August,” Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney, said of the central bank’s statement earlier this month. “The timing doesn’t seem right for a rout of the Aussie dollar.”
The Australian currency gained 0.2 percent to 92.06 U.S. cents as of 5:06 p.m. in Sydney from Aug. 16, after touching 92.33, the highest since July 29. New Zealand’s dollar advanced 0.4 percent to 81.33 U.S. cents, after touching 81.42, the strongest since May 29.
The Aussie rose 0.4 percent to 89.91 yen. The kiwi strengthened 0.5 percent to 79.43 yen.
The yield on Australia’s 10-year government bond rose as high as 4.03 percent, a level unseen since June 24.
Traders trimmed record positions betting on declines in the Aussie versus the U.S. dollar, 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 62,721 as of Aug. 13, compared with an all-time high of 76,779 a week earlier.
“Momentum has moved against those positions,” said Westpac’s Callow. “The market was really excessively bearish.”
The Aussie has gained 0.5 percent in the past week, trimming to 9.5 percent the drop over the past six months that makes it the biggest loser among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. New Zealand’s dollar added 1.5 percent in the last week, the most on the indexes, reducing its six-month loss to 1.3 percent.
The RBA cut the benchmark lending rate to a record-low 2.5 percent on Aug. 6. Traders see 54 percent odds that the central bank will lower borrowing costs again this year, interest-rate swaps data compiled by Bloomberg show. That compares to a 64 percent implied probability a week earlier.
The central bank is signaling that further cuts “would require a material deterioration in the outlook, beyond that embodied in the Statement on Monetary Policy,” Kieran Davies, the chief economist at Barclays Plc in Sydney, wrote in a research note today. The minutes “should shed some light” on the shift to the less dovish tone, according to the note.
The RBA said in its quarterly policy outlook statement on Aug. 9 that gross domestic product will grow 2.25 percent in the year to December 2013, compared with 2.5 percent forecast three months earlier. The median estimate of economists surveyed by Bloomberg News is for a 2.5 percent expansion. The economy grew 3.6 percent in 2012.
Traders see a 24 percent chance that the Reserve Bank of New Zealand will raise the benchmark lending rate from a record-low 2.5 percent by the end of this year, according to swaps data. A week earlier, the odds of an increase were 21 percent.
New Zealand’s services industries expanded at the fastest pace in nine months in July, Business New Zealand and Bank of New Zealand Ltd. said today. Producer input and output prices rose in the second quarter from the three months before, according to Statistics New Zealand.
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