Australia’s dollar was set to complete the longest run of weekly declines against its New Zealand counterpart in 12 years as traders raise bets the bigger nation’s Reserve Bank will cut borrowing costs next week.
Swaps traders see a 59 percent chance the RBA will lower the benchmark rate on May 7, compared with 46 percent a week ago, according to data compiled by Bloomberg on overnight-index swap rates. The New Zealand dollar strengthened against major peers before U.S. data that may show the jobless rate remained unchanged, fanning speculation the Federal Reserve will avoid reducing monetary stimulus.
“We sold Aussie-kiwi at NZ$1.2560, we’re still short the pair,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., referring to the currencies of Australia and New Zealand. A short position is a bet that an asset will decline. “Our view all along was that Aussie-kiwi would fall because of the relative central bank paths.”
The Australian dollar fell 0.2 percent to NZ$1.2036 as of 5:05 p.m. in Sydney after touching $1.2027, the weakest since October 2009. It’s depreciated 0.6 percent this week, poised for a seventh week of declines that would be the longest losing streak since March 2001. The Aussie added 0.1 percent to $1.02533, while the New Zealand dollar gained 0.3 percent to 85.19 U.S. cents.
Japan’s markets are shut today and May 6 for national holidays.
The performance of services index fell to 44.1 in April, the lowest this year, from 49.6 the prior month, the Australian Industry Group and Commonwealth Bank of Australia said today. The 50 level is the dividing line between expansion and contraction.
The index of producer prices rose 0.3 percent in the three months ended March 31 from the prior quarter when it increased 0.2 percent, the statistics bureau said in Sydney.
The U.S. Labor Department may say today that the unemployment rate held at 7.6 percent in April, according to the median forecast of economists surveyed by Bloomberg News. Non-farm payrolls probably increased by 140,000 workers after an 88,000 gain in March, they estimate.
The Fed said May 1 that it will maintain its bond buying at a pace of $85 billion a month to spur growth and is prepared to raise or lower the amount as economic conditions evolve. Bank of Japan data showed yesterday the nation’s monetary base expanded 23 percent in April from a year earlier, the most in two years, as the central bank plans to double the measure of funds in the economy in the next two years to end deflation.
“Newly printed money, more of it, needs to find a home, and that’s why it’s going into the Aussie and the kiwi,” said Westpac’s Speizer. “We’re going to have a soggy patch of U.S. data over the next few months, and I think that will take away any expectations” that the Fed will taper its bond purchases, he said.
Australia’s government debt yielded 1.65 percentage points more than its global peers, according to indexes compiled by Bank of America Merrill Lynch, underpinning demand for higher-yielding assets. That compares with a low of 98 basis points, or 0.98 percentage point, last year.
The rate on Ausralia’s benchmark 10-year note was little changed at 3.04 percent. It fell 12 basis points since April 26, the biggest weekly decline since March 29. The yield dropped for a seventh week to match the longest stretch since September 2008.
The New Zealand dollar rose 0.4 percent to 83.58 yen, having gained 0.5 percent since April 26. The Aussie climbed 0.3 percent to 100.51 yen, paring its weekly decline to 0.3 percent.