Australia’s dollar fell to the lowest in nearly two weeks after Reserve Bank Governor Glenn Stevens said it may be “materially lower” in the future.
The Aussie dropped versus all 16 of its major counterparts after Stevens said there will eventually be a tapering of U.S. stimulus that has debased the greenback. The Australian currency’s loss today pared its monthly gain versus the U.S. dollar to 2 percent, which is still the most among peers. New Zealand’s kiwi weakened before its central bank meets Oct. 31 and as Asian stocks fell.
“The Aussie’s dropped on the Stevens comments but it was already under a bit of pressure anyway,” said Tim Kelleher, the head of institutional foreign-exchange sales in Auckland at ASB Bank Ltd. “The market got a little carried away on the topside with both the Aussie and kiwi over the last fortnight and we’re now seeing them drift back off.”
Australia’s dollar fell 0.7 percent to 95.09 U.S. cents at 4:51 p.m. in Sydney and touched 95.04, the least since Oct. 16. It slumped 0.8 percent to 92.78 yen. New Zealand’s dollar lost 0.3 percent to 82.74 U.S. cents and 0.5 percent to 80.70 yen.
The MSCI Asia Pacific Index of regional stocks dropped as much as 0.5 percent.
“The foreign-exchange market is perhaps another area in which investors should take care,” Stevens said today in the text of a speech in Sydney. “It seems quite likely that at some point in the future the Australian dollar will be materially lower than it is today.”
The comments mark a “significant ramping up” of RBA opposition to the level of the Aussie, Todd Elmer, a Singapore-based currency strategist at Citigroup Inc. wrote in a note to clients today. Investors may benefit by positioning for declines in Australia’s dollar versus New Zealand’s, he wrote.
The Aussie declined 0.3 percent to NZ$1.1496, falling for a second day.
The RBA is grappling with the economic impact of a currency that’s about 10 percent above its average in the past decade even as a record mining investment boom ebbs. Stevens has slashed interest rates to a record low 2.5 percent and there’s about a 42 percent chance policy makers will cut borrowing costs again by May, swaps data show.
The value of projects under construction or committed in Australia slid 0.7 percent to A$464.7 billion ($442 billion) as of Sept. 30 from three months earlier, Deloitte Access Economics said in a report released today.
“The decline in overall business investment is expected to strip the better part of a year’s worth of growth out of the Australian economy over the next three years,” according to the report.
The nation’s 10-year bond yield fell two basis points, or 0.02 percentage point, to 3.99 percent. The three-year rate fell four basis points to 2.97 percent.
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