March 4 (Bloomberg) -- Australia’s dollar fell to an almost eight-month low after a report showed building approvals unexpectedly declined, adding to speculation the Reserve Bank will cut interest rates this year.
The New Zealand dollar and the so-called Aussie slid against most of their 16 major peers after China’s Purchasing Managers’ Index for services industries indicated the slowest expansion in five months. China is the largest trading partner for both Australia and New Zealand.
“Today’s data continues to paint a picture of a fairly weak domestic economy,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “Some of the softness in the Asian data is also not helping Australia. Price action for the Aussie is pretty negative at the moment.”
The Australian dollar dropped 0.8 percent to $1.0125 as of 4:49 p.m. in Sydney, after touching $1.0117, the lowest since July 12. It fell 0.9 percent to 94.61 against the yen.
The New Zealand dollar declined 0.6 percent to 82.03 U.S. cents, after falling to 81.96 cents, the lowest since Dec. 31. The so-called kiwi slid 0.8 percent to 76.64 yen.
Australian home-building approvals declined in January for a second-straight month. The number of permits granted to build or renovate houses and apartments fell 2.4 percent from December, when they fell a revised 1.7 percent, the Bureau of Statistics said in Sydney today. The median economist forecast was for a 2.8 percent gain in a Bloomberg News survey.
China’s non-manufacturing PMI fell to 54.5 in February from 56.2 in January, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement yesterday. The report adds to concerns that China’s rebound from a seven-quarter slowdown is losing steam.
The Reserve Bank of Australia is forecast to leave its benchmark interest rate unchanged at 3 percent at a policy meeting tomorrow, according to a separate Bloomberg survey. That comes after 1.75 percentage points of reductions in the 14 months through December.
The RBA will probably cut the rate by a quarter percentage point in May, according to Michael Turner, a fixed-income strategist in Sydney at Royal Bank of Canada. “After the December cut, we thought officials would probably take a breather for the next couple of months,” he said.
Interest-rate swaps data compiled by Bloomberg show traders see an 82 percent chance RBA officials will keep the overnight cash-rate target at 3 percent tomorrow. There’s a 75 percent chance the rate will fall to a record 2.75 percent or lower by the June 4 decision.
Australia’s 10-year government bond yield slid six basis points, or 0.06 percentage point, to 3.28 percent, the least since Jan. 24. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates that are sensitive to expectations for borrowing costs, declined 2 basis points to 2.94 percent.
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