Aussie Dollar Touches Month-High After RBA Holds Key Rate

Australia’s dollar climbed to the highest level since September after the Reserve Bank unexpectedly kept its benchmark interest rate unchanged at a developed-world high.

The so-called Aussie strengthened against all of its 16 major counterparts after RBA Governor Glenn Stevens and his board left the overnight cash-rate target at 3.25 percent. Demand for the Australian and New Zealand currencies was limited before the U.S. presidential election today and concern grew Greece will fail to win a bailout.

“The RBA was expected to potentially cut rates today and they didn’t,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “As a result the Aussie dollar rallied. Bond yields have risen.”

Australia’s dollar reached $1.0435, the strongest since Sept. 28, before trading at $1.0426 as of 4:04 p.m. in Sydney, 0.6 percent higher than the close yesterday. The currency rose 0.3 percent to 83.44 yen. The New Zealand dollar, nicknamed the kiwi, fetched 82.66 U.S. cents from 82.52.

Australian bonds declined, pushing the yield on the 10-year note up by one basis point, or 0.01 percentage point, to 3.17 percent.

Seven of 27 economists in a Bloomberg News survey predicted the inaction by the RBA, with the other 20 forecasting a reduction to 3 percent.

“At today’s meeting, the Board judged that, with inflation expected to be consistent with the target and growth close to trend, but with a more subdued international outlook than was the case a few months ago, the stance of monetary policy remained appropriate,” Stevens said in a statement today.

House Prices

Data today showed that Australia’s house prices rose in the third quarter from the previous three-month period, the first back-to-back increase since 2010. An index measuring the weighted average of prices for established houses in eight major cities increased 0.3 percent from the previous quarter, when it gained a revised 0.6 percent, the Australian Bureau of Statistics said in Sydney today.

As Greece seeks a 31 billion-euro ($40 billion) financing tranche this month, Prime Minister Antonis Samaras is facing down a revolt in his three-party coalition. The leader of the Democratic Left reiterated Nov. 4 his party’s opposition to changes in the labor law demanded by international creditors. While no date has been set for a vote on that bill, it may come as soon as tomorrow. The budget vote is slated for Nov. 11.

“We have been seeing a little bit of pull back in risk appetite given the uncertainty around the U.S. election and Greek budget negotiations,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “Investors are sticking to the sidelines for now.”

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