Australian Dollar Rises After RBA Holds Rates; Bonds Pare Gain

The Australian dollar rose after the Reserve Bank left interest unchanged and said conditions in emerging markets are considerably more challenging than a year ago. Government bonds pared gains.

The expected fluctuation of the Aussie against the greenback rose toward the highest in more than four months as traders weighed risks from a rout in emerging markets. The Reserve Bank will release its quarterly statement on policy on Feb. 7.

“If you look at the RBA statement, that is much less dovish than the previous statement,” said Divya Devesh, a foreign-exchange analyst at Standard Chartered Plc in Singapore. “They have dropped the reference to the exchange rate being uncomfortably high, so that’s definitely more hawkish. While earlier they were keeping the door open on more easing, now they are trying to say it’s the end of the current easing cycle. We’ve seen the Aussie rally on back of that.”

The Aussie rose 1 percent to 88.37 U.S. cents as of 2:47 p.m. in Sydney. The currency advanced 1.3 percent to 89.52 yen from yesterday. Australia’s dollar strengthened 0.9 percent to NZ$1.0917, the highest level since Dec. 11.

The 10-year bond yield was at 3.98 percent, compared with 3.96 percent right before the RBA’s decision.

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

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

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