The Australian dollar dropped to the lowest since September 2010 after Reserve Bank Governor Glenn Stevens said the currency has been too high and the economy “will probably get” a lower currency if needed.
The Aussie briefly rose after data showed the nation’s trade surplus in May was more than 10 times what economists had estimated. It declined to the weakest in 4 1/2 years against its New Zealand counterpart after Auckland-based Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said whole milk powder prices increased. Demand for both currencies was damped as Asian shares fell.
“The Aussie is falling across the board in reaction to comments from the RBA Governor about the currency,” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo. “The Aussie dollar will probably continue its weakening trend.”
The Australian dollar dropped to 90.70 U.S. cents, the least since September 2010, before trading 0.8 percent lower at 90.76 as of 4:16 p.m. in Sydney. It declined 0.7 percent to 91.39 yen. The Aussie lost 0.5 percent to NZ$1.1743 after earlier touching NZ$1.1738, the weakest since December 2008.
New Zealand’s dollar depreciated 0.3 percent to 77.29 U.S. cents and 0.2 percent to 77.83 yen.
The yield on Australia’s 10-year government bond was little changed at 3.74 percent. The MSCI Asia Pacific Index lost 1.3 percent.
“If the economy ‘needs’ a lower exchange rate, it will probably get it,” Stevens said in a speech in Brisbane to the Economic Society of Australia today. He said the central bank’s board “deliberated for a very long time” yesterday before deciding to keep its key interest rate unchanged at a record low 2.75 percent.
“Stevens is showing that perhaps the decision not to cut yesterday was closer than the market was anticipating,” said Derek Mumford, a director at Rochford Capital, a currency risk-management company in Sydney. “He is still looking to talk down the Aussie dollar and signaling that interest-rate cuts are still on the table.”
Traders see more than 50 percent chance the RBA will cut its key rate to 2.5 percent at its next meeting on Aug. 6, based on swaps data compiled by Bloomberg. Earlier today before Stevens speech, the swaps signaled about a 37 percent chance of a rate cut next month.
He said yesterday in a statement accompanying the rate decision that “it is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy.”
The Aussie has dropped almost 11 percent since the RBA unexpectedly cut its key rate on May 7. The slump also reflects slowing growth in China and comments by Federal Reserve Chairman Ben S. Bernanke, who said on June 19 that policy makers may begin slowing bond purchases this year if the economy achieves sustainable growth.
Australia’s trade surplus was A$670 million ($608 million) in May, the Bureau of Statistics reported in Sydney today, compared with the median estimate of A$53 million in a Bloomberg News survey of economists. That’s up from a revised A$171 million in April.
“That was a bit better than expected, but that being said, I think the concern for the Aussie is still there,” Thomas Harr, head of Asia local-markets strategy at Standard Chartered Plc in Singapore, said of the trade data. “I do think that the trend is for a lower Aussie given the concerns about slower China growth and the commodities being much weaker now.” The Thomson Reuters/Jefferies CRB index of raw materials has fallen more than 5 percent since the end of March.
Separate figures from Australia’s government showed retail sales rose 0.1 percent in May, less than economists expected.
Whole milk powder for delivery across all contracts through January rose 0.1 percent, according to a trade-weighted index posted on Fonterra’s GlobalDairyTrade website. The average winning price climbed to $4,757 a metric ton, the highest since April 16, from $4,668 at the last auction two weeks ago.