March 7 (Bloomberg) -- Australia’s dollar rebounded from its biggest decline in a week on speculation that a wider-than-expected trade deficit reported today won’t be enough to prompt the Reserve Bank to cut interest rates.
The so-called Aussie rose against most major peers as traders stuck with bets that policy makers will keep the benchmark interest rate unchanged at a meeting next month. New Zealand’s currency, known as the kiwi, slid for a second day versus the greenback after gauges of Asian stocks and raw materials declined.
“The RBA has taken the view that the easing they’ve done so far has yet to work its way into the economy,” said Gareth Berry, a currency strategist at UBS AG in Singapore. “If they do cut at all this year, it’s not going to be immediate. Some bearishness on the Aussie is justified, but overbearishness is not.”
The Australian dollar added 0.2 percent to $1.0248 as of 4:45 p.m. in Sydney from yesterday when it dropped 0.2 percent, the most since Feb. 26. It was little changed at 96.25 yen.
The New Zealand dollar dipped 0.1 percent to 82.80 U.S. cents from 82.84. It weakened 0.2 percent to 77.76 yen.
Interest-rate swaps data compiled by Bloomberg show traders see a 77 percent chance the Reserve Bank of Australia will keep the overnight cash rate target at 3 percent when policy makers next meet on April 2. UBS predicts no interest rate cuts for the rest of this year.
Australia’s dollar initially slid after data from the statistics bureau showed the nation’s trade deficit widened to A$1.06 billion ($1.08 billion) in January from a revised A$688 million the month before that was larger than originally reported. Economists surveyed by Bloomberg News predicted a A$500 million deficit.
The RBA refrained from cutting the highest benchmark interest rate among major developed nations for a second-straight meeting on March 5, after Governor Glenn Stevens and his board implemented 1.75 percentage points in borrowing-cost reductions in the 14 months through December.
There are signs the “significant easing in monetary policy” last year is having an impact, Stevens said in a statement.
“We think the broad economic picture in Australia, although not necessarily super strong, is still not enough for the RBA to ease any further this year,” said Bill Diviney, Tokyo-based currency strategist at Barclays Plc.
The New Zealand dollar declined as the MSCI Asia Pacific Index of shares fell 0.4 percent. The Standard & Poor’s GSCI Index of 24 raw materials was little changed following a 0.7 percent drop yesterday.
Australia’s 10-year government bond yield rose four basis points, or 0.04 percentage point, to 3.44 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to interest-rate expectations, dropped 1 1/2 basis points to 2.98 percent.
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