Aussie Dollar Touches 3-Month Low as Rate Cut Bets Climb

Australia’s dollar slid to the lowest level in almost three months before a report this week that may show unemployment increased, fueling speculation that the Reserve Bank will reduce its key rate next month.

The so-called Aussie weakened versus most of its 16 major counterparts after Treasurer Wayne Swan said yesterday that reduced interest rates will help Australia weather deteriorating conditions in the world economy. New Zealand’s dollar, nicknamed the kiwi, remained lower after its biggest weekly drop in more than four months, as Asian shares declined.

If Australian jobs data due Oct. 11 is weak, that “will just get the market even more excited about RBA rate cuts,” said Joseph Capurso, a Sydney-based strategist at Commonwealth Bank of Australia, the nation’s biggest lender. “Aussie cross selling has been going on for quite a while and that’s been dragging the Aussie lower. The Aussie may test parity this week” against its U.S. counterpart.

Australia’s dollar fell 0.2 percent to $1.0165 at 4:36 p.m. in Sydney after earlier touching $1.0150, the lowest since July 13. It declined 0.3 percent to 79.88 yen. New Zealand’s currency declined 0.1 percent to 81.76 U.S. cents after falling 1.5 percent in the week through Oct. 5, the most since the period ended May 18. It dropped 0.2 percent to 64.26 yen.

Australia’s 10-year yield rose three basis points to 3.08 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, added two basis points to 2.66 percent.

The MSCI Asia Pacific Excluding Japan Index dropped 0.8 percent. Japan’s markets are shut for a holiday.

Jobless Rate

Australia’s unemployment rate probably climbed to 5.3 percent last month from 5.1 percent in August, according to the median estimate of economists surveyed by Bloomberg News. Payrolls probably increased by 5,000 in September from the previous month, when they fell by 8,800, the survey showed.

Australian jobs advertised in newspapers and on the Internet fell in September for a sixth-straight month, declining 2.8 percent, according to an Australia & New Zealand Banking Group Ltd. report released in Melbourne today.

Interest-rate swaps data compiled by Bloomberg show traders see an 87 percent chance the RBA will lower its overnight cash rate target by 25 basis points to 3 percent on Nov. 6, following a quarter-percentage point reduction on Oct. 2. That compares with an 82 percent probability on Oct. 5. If policy makers deliver a rate cut next month, that would be the first back-to-back reduction since June.

Economic Headwinds

“While some parts of our economy are under pressure from global headwinds, a high dollar and changing consumer behavior, it’s encouraging that these much lower interest rates have come at the same time as unemployment is low and economic growth is healthy,” Swan wrote yesterday in his weekly economic note.

The World Bank said today that Asia’s emerging economies have room to ease monetary and fiscal policies as China’s slowdown drags the region’s growth to an estimated 11-year low this year. China is Australia’s largest trading partner and New Zealand’s second-biggest export destination.

Bets on a gain in the Australian currency fell for the first time in four weeks after the RBA rate decision. The difference in the number of wagers by hedge funds and other large speculators on a gain in the Australian dollar compared with those on a decline -- so-called net longs -- was 63,743 in the period ended Oct. 2, according to figures from the Washington-based Commodity Futures Trading Commission. That compares with 89,562 a week earlier, the most since April 2011.

Australia’s dollar has fallen 2.9 percent this year, the worst performance after the Japanese yen among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. New Zealand’s kiwi dollar gained 3.3 percent.

Home sales in New Zealand rose 8 percent in September from a year earlier after a 16.2 percent gain in the previous month, according to data released today by the Real Estate Institute of New Zealand. The house price index climbed 0.6 percent last month from August, when it added 1.3 percent.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE