The Australian dollar declined for a second day versus the yen before an inflation report this week that may prompt further interest-rate cuts, damping demand for the nation’s assets.
The so-called Aussie retreated from a more than four-year high against the yen reached last week amid speculation the Bank of Japan will fail to meet market expectations for stimulus when it concludes a two-day policy meeting tomorrow. New Zealand’s dollar fell to a two-week low as Asian stocks halted gains.
“Leading into this week’s inflation number, the market is going to be a little bit cautious” on Australia’s dollar, said David Greene, a senior corporate currency dealer at Western Union Business Solutions, a global payment services network. “We may see some flows back into the yen if the BOJ decision isn’t what the market was hoping for and that may see the Aussie lower.”
The Australian dollar declined 0.6 percent to 94.15 yen as of 4:30 p.m. in Sydney, and traded little changed at $1.0511 after touching $1.0486 on Jan. 18, the least since Jan. 8. It touched 95.03 yen on Jan. 18, the most since August 2008. New Zealand’s currency, known as the kiwi, weakened 0.8 percent to 74.85 yen. It declined 0.1 percent to 83.57 cents, after touching 83.34, the lowest since Jan. 7.
Australia’s trimmed mean gauge of core prices rose 0.7 percent in the fourth quarter, matching the previous three-month period’s reading, the nation’s statistics bureau may say Jan. 23, according to the median forecast of economists surveyed by Bloomberg News.
A reading of 0.6 percent or lower will prompt traders to increase bets on a rate cut when the Reserve Bank of Australia meets Feb. 5, according to National Australia Bank Ltd.
Swaps traders are betting on a 47 percent chance of a rate cut to 2.75 percent next month, after a 0.25 percentage point reduction to 3 percent on Dec. 4, data compiled by Bloomberg show.
The yen strengthened against the Aussie and New Zealand dollar after Koichi Hamada, who’s advising Prime Minister Shinzo Abe on choosing a new Bank of Japan chief, said yesterday the bank will need to slow monetary easing if the effects on prices and the yen go too far. Vice Finance Minister Shunichi Yamaguchi said last week Abe’s administration anticipates the BOJ will adopt a 2 percent inflation target.
The MSCI Asia Pacific Index fell as much as 0.4 percent before trading little changed.
Yields on Australia’s 10-year government securities fell 5 basis points, or 0.05 percentage point, to 3.36 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to interest-rate expectations, was unchanged at 2.81 percent.