The Australian dollar dropped to a three-month low against the greenback after data showed economic growth was weaker than analysts estimated, damping demand for the nation’s assets.
The Aussie slid against all 16 major peers before a private U.S. jobs report as markets weigh the prospects for a tapering of Federal Reserve stimulus over coming months. Australia’s central bank yesterday kept interest rates at a record-low 2.5 percent and the median forecast is for the benchmark to remain unchanged through 2014. New Zealand’s dollar rose to its strongest since 2008 versus the Aussie as the two-year swap rate in the smaller nation reached its highest in two years.
“It’s a disappointing GDP number and we’re currently running significantly below trend, so clearly the Australian economy requires further stimulus,” said Robert Rennie, global head of foreign-exchange and commodity strategy at Westpac Banking Corp. in Sydney. “The Aussie has weakened but we’re beginning to show signs of basing in the low 90s. I think the Aussie remains in the 90 to 95-cent range.”
The Australian dollar fell 0.8 percent to 90.63 U.S. cents as of 4:45 p.m. in Sydney and reached 90.46, the weakest since Sept. 4. It touched NZ$1.1042, the least since October 2008. New Zealand’s currency declined 0.6 percent to 81.91 U.S. cents.
Australia’s gross domestic product expanded 0.6 percent in the third quarter from the previous three months when it rose a revised 0.7 percent, the statistics bureau said today. Compared with a year ago, it grew 2.3 percent from 2.4 percent. The median forecasts in a Bloomberg News survey were 0.7 percent quarterly and 2.6 percent annual expansion.
The nation faces a “growth hole” as mining investment drops and the government budget has deteriorated significantly in recent months, Treasurer Joe Hockey said today.
Three-year Australian government bold yields fell four basis points, or 0.04 percentage point, to 3.08 percent, the biggest drop since Nov. 14. The 10-year rate declined two basis points to 4.3 percent. New Zealand’s two-year swap rate touched 3.735 percent, the most since July 2011.
“The Australian dollar, while below its level earlier in the year, is still uncomfortably high,” RBA Governor Glenn Stevens reiterated yesterday in a statement accompanying the bank’s rates decision. “A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy.’
The Aussie will drop toward 80 U.S. cents in the long-term as the nation adjusts to lower export prices relative to import prices amid declining demand for its commodity shipments from China, Jeremy Lawson, chief economist at Standard Life Investments, said in a briefing in Sydney. Demand for the currency will also wane as other developed economies including the U.S. begin to exit from accommodative monetary policies, he said.
‘‘In the very short term it may be difficult to see a lot of depreciation,’’ Lawson said. ‘‘There are limits to the degree that you can talk the currency down unless it’s actually backed by policy action,’’ he said, referring to the fact that the RBA probably won’t cut rates any further.
U.S. companies added 170,000 positions in November after a gain of 130,000 in October, according to the median economist estimate in a Bloomberg survey before the ADP Research Institute report is released today.
Economists predict Fed policy makers will pare the monthly pace of bond buying to $70 billion from $85 billion at their March 18-19 meeting, according to the median of estimates in a Bloomberg News survey on Nov. 8. A separate poll shows the Fed’s benchmark rate will be higher in the first quarter of 2015, according to weighted-average estimates.
‘‘The risk here is that everyone is thinking about tapering and what that means for the U.S. dollar and currencies like the Aussie,” said Chris Weston, chief market strategist at brokerage IG Ltd. in Melbourne. “The RBA is leaving the door open for the Fed to come out and begin its tapering and then the policy divergence should be one of the factors that will take Aussie lower over time.”
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