The Australian dollar weakened versus all of its 16 major counterparts before a central bank meeting tomorrow, at which officials are expected to reduce borrowing costs for the first time this year.
The so-called Aussie fell against the greenback and yen after a gauge of the South Pacific nation’s monthly inflation rate slowed this month and new homes sales dropped in March to a record low, increasing the Reserve Bank of Australia’s scope to lower its benchmark rate. Declines in New Zealand’s dollar were limited after data showed home-building approvals climbed by the most in seven months in March, boosting demand for the currency.
“Some type of interest-rate cut is all but locked in” for Australia’s central bank, said Jonathan Cavenagh, a Singapore-based currency strategist at Westpac Banking Corp., the country’s second-biggest lender. “I don’t think the Aussie is going to rally too far from here.”
The Australian dollar lost 0.1 percent to $1.0459 at 4:08 p.m. in Sydney after rising 0.9 percent last week. It declined 0.3 percent to 83.84 yen. New Zealand’s currency was at 82.20 U.S. cents from 82.25 cents on April 27. The so-called kiwi bought 65.91 yen from 65.99.
The Aussie is set for a 1.1 percent advance versus the dollar this month, while its New Zealand counterpart has gained 0.5 percent over the same period.
RBA policy makers are predicted to lower the overnight cash rate target tomorrow by 25 basis points, or 0.25 percentage point, from the current level of 4.25 percent, according to 27 of the 29 forecasters in a Bloomberg News survey. Two economists have predicted a 50-basis-point reduction.
Sales of new homes in Australia dropped 9.4 percent to 5,443 in March from a month earlier, the Housing Industry Association said today in a statement that urged the central bank to cut interest rates by half a percentage point at tomorrow’s meeting.
Consumer prices rose 0.3 percent this month from March, when they climbed 0.5 percent, according to an index compiled by TD Securities Inc. and the Melbourne Institute released in Sydney today. Figures from the Australian Bureau of Statistics last week showed the increase in core consumer prices last quarter was the slowest since 1998.
RBA Governor Glenn Stevens signaled April 3 he may end a three-month pause in interest-rate cuts as soon as tomorrow if weaker-than-forecast growth slows consumer inflation.
“In Australia, the consumer is really struggling,” Kumar Palghat, managing director and founder of Kapstream Capital Pty in Sydney, told Bloomberg Television. “I really think tomorrow the RBA should cut 50 basis points. That will be a meaningful number to kick-start the economy again.”
The yield on Australia’s 10-year debt rose four basis points to 3.70 percent after dropping to a record 3.636 percent on April 27. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, gained three basis points to 2.78 percent.
The number of home-building permits in New Zealand surged 19.8 percent in March from the previous month, when they fell a revised 6.2 percent, the country’s statistics office said today. That compared with a median forecast of a 6 percent advance in a Bloomberg survey of economists.
The New Zealand building report “is encouraging,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “The kiwi does have a bid tone to it. It can go a bit higher over the next few days.”
The nation posted a trade surplus of NZ$134 million ($110.2 million) last month, according to a separate report. The median estimate was for a surplus of NZ$417 million.
New Zealand’s dollar has gained 3.2 percent this year, according to Bloomberg Correlation Weighted Indexes, which tracks 10 developed-nation currencies. Its Australian counterpart has lost 0.4 percent over the same period.