Australia’s dollar slid to the lowest in almost three years before U.S. jobs data that may add to the case for a reduction in Federal Reserve stimulus, which has supported higher-yielding assets globally.
The Aussie remained lower after a four-day drop before Reserve Bank of Australia officials gather for a monetary policy decision next week, when they are expected to lower borrowing costs. The currency held losses after the government boosted its budget deficit forecast for the current fiscal year. New Zealand’s kiwi rose, paring a weekly decline that’s the biggest in six weeks, as Asian stocks rose.
“The risk is that Aussie and kiwi do weaken on the back of a stronger payrolls number,” said Peter Dragicevich, a Sydney-based currency economist at Commonwealth Bank of Australia, the nation’s largest lender. Improving U.S. data “would just reinforce expectations that the Fed will begin to taper asset purchases over the next few months.”
The Australian dollar lost 0.1 percent to 89.16 U.S. cents as of 4:45 p.m. in Sydney and is set for a 3.7 percent slide this week. It touched 88.89 cents, the weakest since August 2010. The kiwi was little changed at 78.94 U.S. cents. It’s headed for a 2.4 percent, five-day drop, the most since the period through June 21.
Australia’s 10-year government bond yield climbed 13 basis points, or 0.1 percentage point, to 3.79 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose 3 1/2 basis points to 3.39 percent.
The U.S. Labor department will probably say today employers added 185,000 jobs last month after boosting positions by 195,000 in June, according the median estimate of economists surveyed by Bloomberg News. The unemployment rate may have fallen to 7.5 percent, which would be the lowest since April.
Federal Reserve Chairman Ben S. Bernanke will trim the central bank’s monthly purchases of Treasury and mortgage debt to $65 billion in September, from the current pace of $85 billion, according to half of 54 economists polled by Bloomberg from July 18-22.
The Aussie has lost almost 12 percent in the past three months, the worst performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The kiwi had the second-biggest decline, falling 4.9 percent.
The RBA will probably cut Australia’s overnight cash rate target by 25 basis points to 2.5 percent at a policy meeting on Aug. 6, according to 26 of 27 economists surveyed by Bloomberg News. Traders agree, seeing a 94 percent chance of a reduction, according to interest-rate swaps data compiled by Bloomberg.
The Australian government predicts the budget deficit for the year ending June 30, 2014 will be A$30.1 billion ($26.8 billion), compared with a previous forecast for an A$18 billion shortfall, it said in a statement released today.