Aussie Touches Month Low as Retail Sales Miss Estimates

Australia’s dollar touched the lowest level in almost a month after a report showed retail sales grew more slowly than economists estimated.

The so-called Aussie weakened versus most of its 16 major counterparts as the data added to expectations the Reserve Bank of Australia will reduce borrowing costs for a second-straight meeting in November to bolster growth. The Australian and New Zealand dollars strengthened against the yen as the Bank of Japan begins a two-day policy meeting today after expanding stimulus last month.

“We’ve been seeing a string of relatively weak data from Australia,” said Thomas Harr, head of Asia local markets strategy at Standard Chartered Plc Singapore. “The risk for the Aussie is still to the downside.”

The Australian dollar was at $1.0226 as of 4:20 p.m. in Sydney after earlier falling as much as 0.3 percent to $1.0182, the lowest since Sept. 6. It gained 0.2 percent to 80.35 yen. New Zealand’s dollar, known as the kiwi, added 0.2 percent to 82.12 U.S. cents and rose 0.4 percent to 64.53 yen.

The yield on Australia’s 10-year debt rose to 2.98 percent from 2.92 percent yesterday, when it dropped to as low as 2.91 percent, the least since July 27. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, advanced three basis points to 2.62 percent.

Below Expectations

The Australian statistics bureau said retail sales climbed 0.2 percent in August from the previous month, advancing at half the pace predicted by economists in a Bloomberg News survey. The figure compares with a 0.8 percent decline in July.

The report comes after data released yesterday showed the country’s trade deficit widened in the same period to the most since 2008. Building approvals rose in August from a month earlier, according to a separate report today.

“The sub-consensus retail sales print kicked off a wave of selling” in the Aussie dollar, Westpac Banking Corp. said in an e-mailed note to clients today. Key levels in the near term are $1.0167 and $1.0168, the bank said, referring to the lows reached on Sept. 5 and 6.

Interest-rate swaps data compiled by Bloomberg show traders see a 70 percent chance the RBA will reduce its benchmark rate on Nov. 6 by a quarter point to 3 percent. That would be the first back-to-back rate cut since the two months ended June.

Australian bonds fell as Asian equities rallied, with the MSCI Asia Pacific Index of shares climbing 0.5 percent.

“Equities are stronger and this seems to have taken the edge off Aussie bonds,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at RBC Capital Markets in Sydney. “It could be that risk is slightly better bid ahead of the Bank of Japan meeting.”

BOJ Meeting

The Australian currency climbed versus the yen before tomorrow’s decision from the BOJ.

Policy makers last month decided to increase the Japanese central bank’s asset-purchase program by 10 trillion yen ($127 billion) to 55 trillion yen, saying the economy’s pick-up was slowing while prices were flat.

Data over the past week have added to the case that the BOJ will need to expand stimulus to boost growth and achieve its 1 percent inflation goal. Consumer prices in August matched the steepest decline in 16 months and the nation’s biggest manufacturers grew more pessimistic last quarter.

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