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Aussie Holds Loss as RBA Shows Concern About Labor Market

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Dec. 18 (Bloomberg) -- The Australian dollar held losses after the nation’s Reserve Bank cited a softer labor market for cutting interest rates at this month’s meeting.

The Reserve Bank of Australia said growth is stabilizing in China, according to minutes of the Dec. 4 meeting when it cut its overnight cash-rate target to 3 percent. Losses in the so-called Aussie were limited after the Conference Board’s gauge of leading economic indicators in Australia rose in October. New Zealand’s dollar remained lower after the Treasury Department lowered its budget surplus forecast for 2015.

“The Aussie got sold first on expectations of additional rate cuts from the RBA,” said Takuya Kawabata, a researcher in Tokyo at Gaitame.com Research Institute Ltd. “The Aussie was then bought back as the market digested some the positive comments about Chinese growth. The RBA may wait and see for a little while before resuming rate cuts next year.”

The Australian dollar slid 0.1 percent to $1.0540 as of 4:26 p.m. in Sydney from yesterday, when it fell 0.1 percent to $1.0552. The Aussie bought 88.51 yen from 88.52 yesterday, when it touched 89.13, the highest since May 2011.

New Zealand’s dollar, known as the kiwi, lost 0.1 percent to 84.38 U.S. cents from yesterday, when it declined 0.2 percent. The currency was little changed at 70.86 yen.

The yield on Australia’s 10-year government debt rose three basis points, or 0.03 percentage point, to 3.38 percent from yesterday, when it touched 3.41 percent, the highest since Sept. 17.

RBA Minutes

Labor data “suggested that the inflation outlook still afforded the board some scope to provide additional support to demand,” according to the RBA’s minutes released today in Sydney. It also cited “further confirmation that the peak in resource sector investment was near.”

The cut in the benchmark rate by 25 basis points to 3 percent by Governor Glenn Stevens and his board matches the level reached from April-October 2009 that was the lowest since 1960. Interest-rate swaps data compiled by Bloomberg show traders see a 53 percent chance the central bank will lower its benchmark to 2.75 percent in February.

“The RBA minutes are relatively balanced,” said Greg Gibbs, a Singapore-based senior currency strategist at Royal Bank of Scotland Group Plc. “It does not sound that there will be deep further rate cuts.”

The New York-based Conference Board’s index of Australian leading economic indicators climbed 0.2 percent in October from the previous month, when it fell a revised 0.4 percent, according to a report released in an e-mailed statement.

Budget Forecast

New Zealand Finance Minister Bill English said the operating surplus will be NZ$66 million ($56 million) in the year through June 2015, according to the fiscal update released in Wellington today. That compared to a NZ$197 million gap projected in May’s budget. Growth will slow to 2.5 percent in 2014-15 and 2.4 percent a year later, the report forecast.

“We will for some time yet see Europe and the U.S. deal with the problems of low or no growth,” English told reporters. “The high kiwi dollar is a factor of these weaknesses offshore. It is a headwind to our efforts to tilt the economy toward exporting and investment.”

New Zealand’s dollar has risen 6.2 percent so far this year, the best performer tracked by Bloomberg Correlation-Weighted Currency indexes. The Australian dollar has gained 0.4 percent in the same period.

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Amina Mobley in Tokyo at amobley1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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