Oct. 8 (Bloomberg) -- Australia’s currency remained lower as U.S. lawmakers remained at an impasse on how to end a government shutdown and raise the debt limit, damping demand for higher-yielding assets.
U.S. President Barack Obama reiterated he won’t negotiate with Republicans over the debt ceiling, adding to concern of a default by the world’s biggest economy. The Aussie earlier strengthened after data showed gains in business confidence and job advertisements.
“The Aussie is still susceptible to a fall if markets get a little worried about both the debt ceiling and the U.S. economic outlook,” said Joseph Capurso, a Sydney-based currency strategist at Commonwealth Bank of Australia, the nation’s biggest lender. “The longer the political deadlock goes on and the closer we get to those deadlines, the more destabilizing it could be.”
The Australian dollar was little changed at 94.32 U.S. cents as of 4:36 p.m. in Sydney after losing 0.1 percent yesterday. It gained 0.5 percent to 91.60 yen following a 0.9 percent slide yesterday, the most since Sept. 27. New Zealand’s kiwi dollar bought 83.05 U.S. cents, unchanged from the close in New York. It traded at 80.65 yen, up 0.4 percent from yesterday when it declined 1 percent.
Australia’s 10-year bond yield was at 4.08 percent, while the figure for three-year notes stood at 3.02 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.49 percent, the highest since Sept. 19.
Many U.S. government services have been shuttered for a week and the country is nine days away from exhausting its borrowing authority.
Interest-rate swaps data compiled by Bloomberg show traders see a 29 percent the Reserve Bank of Australia will cut borrowing costs from a record-low 2.5 percent to 2.25 percent or lower by year-end, down from 59 percent odds a week earlier.
“RBA rate cut expectations are being wound back,” Craig Ferguson, a currency hedge fund manager at Antipodean Capital Management, said today in an interview with Bloomberg Television. “If we do get further U.S. dollar weakness even over the next week or so, we’d expect the Aussie to have a look up above 95.25.” Australia’s currency last breached 95 cents when it climbed to a high of 95.24 on Sept. 19.
National Australia Bank Ltd. said today its gauge of business confidence climbed to a 3 1/2-year high last month.
Australian employers probably added 15,000 jobs last month after cutting 10,800 in August, according to the median estimate of economists surveyed by Bloomberg News before the Oct. 10 report. If confirmed, that would be biggest increase since April. The unemployment rate remained at a four-year high of 5.8 percent, a separate poll showed.
The employment data “would be the prime number I’m watching for,” said Desmond Chua, a Singapore-based market analyst at CMC Markets. “If that is as good a print as the forecast is, it may mean that the RBA might tilt its policy toward a neutral bias.”
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