Aussie Above Three-Year Low on Rate-Cut Wagers Before CPI Report

The Australian dollar was 0.5 percent from its lowest level in more than three years before data forecast to show annual consumer prices gains quickened, tempering bets on further interest-rate cuts.

The Aussie is falling for a third month as investors wager the domestic economy requires further stimulus. Demand for New Zealand’s kiwi may be supported after milk futures in Chicago jumped to a record. Dairy is New Zealand’s largest foreign-exchange earner, accounting for about 28 percent of exports.

“While our base case scenario is for unchanged policy rate this year, a softer inflation print could see downward pressure on Australian rates and currency,” Daniel Katzive and Vassili Serebriakov, New York-based strategists at BNP Paribas SA, wrote in a note to clients. “We believe it is too early to call a bottom in both Aussie-dollar and Aussie-kiwi.”

Australia’s dollar traded at 88.03 U.S. cents as of 10:56 a.m. in Sydney from 88.06 yesterday. It fell as low as 87.57 on Jan. 20, the least since July 2010. The Aussie fetched 91.76 yen from 91.84. New Zealand’s kiwi slipped 0.1 percent to 83.13 cents and 86.66 yen.

Consumer prices in Australia probably rose 2.4 percent in the fourth quarter from a year earlier, compared with a 2.2 percent gain in the previous period, economists surveyed by Bloomberg News forecast before today’s data. Prices climbed 0.4 percent in the final three months of 2013 from the third quarter’s 1.2 percent gain, the poll shows.

There’s a 15 percent chance the Reserve Bank of Australia will lower its record-low 2.5 percent benchmark rate at its meeting next month and 45 percent odds of a cut by July, swaps data compiled by Bloomberg show.

An index of Australian consumer sentiment fell 1.7 percent to 103.3 in January from the prior month, according to Westpac Banking Corp. data released today.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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

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