Australia’s dollar declined against most of its major peers amid speculation the nation’s central bank will lower interest rates next week to shield the economy from a slowdown in mining.
The so-called Aussie was near a three-week low versus its New Zealand counterpart as traders added to bets the Reserve Bank of Australia will reduce interest rates after a report yesterday showed a lower mining investment projection. Australian bonds rose, with the 10-year yield touching the least in 10 days. Demand for the New Zealand dollar was limited after data showed building permits unexpectedly fell.
“It wouldn’t be overly surprising if the RBA cuts rates next week, given yesterday’s capital expenditure data, which was downgraded,” said Peter Dragicevich, a currency economist in Sydney at Commonwealth Bank of Australia. “We don’t think an actual cut next week will put too much downward pressure on Aussie -- a lot of the cuts are already factored into the market.”
The Australian dollar fell to $1.0430 as of 4:46 p.m. in Sydney from $1.0435 yesterday. The currency is poised for a 0.3 percent decline this week, while it has gained 0.6 percent this month. The Aussie traded at NZ$1.2669 from NZ$1.2682 yesterday, when it touched NZ$1.2660, the lowest since Nov. 7.
The New Zealand dollar bought 82.32 U.S. cents from 82.27 yesterday. It has lost 0.1 percent since the end of last week and is up 0.3 percent for the month.
Australian government bonds rose, with the 10-year yield falling six basis points, or 0.06 percentage point, to 3.16 percent. It earlier touched 3.13 percent, the lowest since Nov. 20.
Australia’s statistics bureau said yesterday mining investment in 2012-2013 is projected at A$109.4 billion ($114 billion), compared with A$119 billion forecast three months earlier.
Nineteen out of 28 economists surveyed by Bloomberg News expect the RBA to cut its benchmark rate by a quarter-percentage point to 3 percent on Dec. 4, while the remainder forecast no change.
With deteriorating domestic fundamentals and terms of trade, the Australian dollar “is likely to remain vulnerable,” Morgan Stanley strategists led by Hans Redeker, wrote in a research note published yesterday. “While market consensus predicts further easing, which would bring Australian policy rates back to historical lows, this does not appear to be fully priced into the market.”
Traders see an 83 percent chance the RBA will lower its overnight cash rate target by a quarter of a percentage point at next week’s meeting, a Credit Suisse Group AG index based on swaps showed. That compares with a 73 percent likelihood shown yesterday.
A central bank report today showed private sector credit rose 0.1 percent in October from the previous month, less than the 0.3 percent growth expected by economists in a Bloomberg News poll. Business credit fell 0.3 percent last month, the biggest decline since June 2011.
Losses in the Australian dollar were limited before data forecast to show Chinese manufacturing expanded in November. The government’s purchasing managers’ index probably climbed to 50.8 this month from 50.2 in October, according to the median estimate of economists surveyed by Bloomberg before the data is released tomorrow. A reading above 50 indicates expansion.
“We expect it to show further improvement in November,” said Commonwealth Bank’s Dragicevich. “That just reinforces our view that China’s economic cycle has bottomed and is improving into year-end.”
In New Zealand, building approvals fell 1.5 percent in October from the previous month, the statistics bureau said in Wellington today. The median estimate of economists surveyed by Bloomberg was for no change.