Aussie Dollar, Yields Advance After Retail Sales Beat Estimates

The Aussie dollar headed for its biggest jump in two weeks after data showed retail sales advanced at the fastest pace in seven months, adding to prospects the Reserve Bank won’t cut interest rates tomorrow.

Government bond yields reached 2 1/2-week highs and the currency strengthened versus all 16 major peers as interest-rate swaps data show traders are almost certain Governor Glenn Stevens and his board will keep borrowing costs unchanged through the end of the year. New Zealand’s currency remained little changed following a two-week loss after the Treasury said the nation’s central bank may have more flexibility on the timing of interest-rate increases.

“Data seem to be turning up recently for the Australian dollar, and that has been a positive,” said Divya Devesh, a foreign-exchange analyst in Singapore at Standard Chartered Plc. “We don’t expect the RBA to cut this year.”

Australia’s currency gained 0.5 percent to 94.88 U.S. cents at 5:02 p.m. in Sydney, set for its biggest climb since Oct. 22. New Zealand’s dollar was at 82.72 U.S. cents after declining 2.8 percent in the previous two weeks.

The yield on Australian debt due in a decade jumped as much as nine basis points to 4.16 percent, the highest since Oct. 17. Three-year government bonds yielded as much as 3.16 percent, the highest in 2 1/2 weeks.

Australia’s retail sales rose 0.8 percent in September, the biggest gain since February, the statistics bureau said. Economists surveyed by Bloomberg News predicted a 0.4 percent increase.

Near Bottom

“From an interest-rate perspective domestically, there’s a growing view that we have hit the bottom,” said Hans Kunnen, a senior economist at St. George Bank Ltd. in Sydney. “We think the Aussie remains at these levels unless expectations somewhere are totally knocked off the track.”

Traders see a 96 percent chance RBA officials will keep the cash rate at a record-low 2.5 percent when they gather tomorrow, swaps data compiled by Bloomberg show. There’s a 88 percent possibility policy makers will leave the benchmark unchanged at their Dec. 3 meeting, according to the contracts.

The Reserve Bank of New Zealand’s restrictions on housing loans “appear to be having the intended effect of damping growth in mortgage finance,” the Treasury said in its monthly report on economic indicators published today. “If these initial impressions are borne out in subsequent data releases, the Reserve Bank may have more flexibility as to when and how quickly it raises interest rates.”

There are 49 percent odds the RBNZ will raise its benchmark, currently at an all-time low of 2.5 percent, to 2.75 percent or higher by March, according to Bloomberg-compiled data. That’s down from a 55 percent chance a month ago.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose four basis points to 3.46 percent, set for the highest close since Oct. 24.

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net

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