Australia’s dollar reached a more than three-month low as traders increased bets on how much the nation’s central bank will cut benchmark rates, damping demand for the country’s assets.
The so-called Aussie weakened after the Reserve Bank of Australia lowered on Feb. 8 its forecasts for inflation and growth, citing a soft labor market and high currency. It remained lower after dropping yesterday against New Zealand’s dollar as reports in the smaller economy showed new house prices and spending on electronic cards rose.
“The RBA has trimmed inflation and growth forecasts so that puts us in line for at least one or two more rate cuts in the next few months,” said David Greene, a senior corporate currency dealer at Western Union Business Solutions, a global payment services network. “Domestic weakness and lack of flow from a fairly worried offshore market are keeping the Aussie weak.”
Australia’s dollar touched $1.0241, the least since Oct. 23, before trading at $1.0255 as of 4:42 p.m. in Sydney from $1.0256 yesterday, when it dropped 0.6 percent. It slid to 96.33 yen after climbing 1.2 percent to 96.73 yen in New York. It fell 0.1 percent to NZ$1.2266 after declining 0.6 percent yesterday.
New Zealand’s currency traded at 83.64 U.S. cents from 83.53 and declined 0.3 percent to 78.54 yen.
Traders estimate Australia’s Reserve Bank will cut its key rate by 0.49 percentage point over 12 months from the 3 percent rate now, according to a Credit Suisse AG index based on overnight indexed swaps. The gauge showed expectations for 33 basis points of reductions on Feb. 4.
The yield on Australia’s 10-year government bond was little changed at 3.46 percent.
The Australian dollar may halt its recent drop versus the U.S. currency after finding so-called support toward $1.0225, JPMorgan Chase & Co. said, citing trading patterns.
The area from $1.0255 to $1.0225 contains the 38.2 percent Fibonacci retracement of the currency’s advance from last year’s low of 95.82 U.S. cents to $1.0625 on Sept. 14. It also includes the 76.4 percent retracement from the October low of $1.0149, Niall O’Connor, a technical analyst at JPMorgan, wrote today in a note to clients.
“We continue to see risk of a short-term reprieve to the recent weakness,” he wrote.
New Zealand’s dollar was supported after a report showed purchases on debit, credit and store cards rose for a fourth month. The value of transactions on electronic cards rose 0.3 percent in January, Statistics New Zealand said today.
N.Z. House Prices
The nation’s house prices rose 7.2 percent in January from a year earlier, led by demand in Auckland, its biggest city, the Real Estate Institute of New Zealand said in an e-mailed statement.
Reserve Bank of New Zealand Governor Graeme Wheeler said Jan. 31 he is closely watching house-price inflation, adding he doesn’t want to see financial stability or inflation risks accentuated by property demand getting too far ahead of supply.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to interest-rate expectations, rose three basis points to 2.93 percent.