The Australian dollar fell versus the U.S. currency and touched a five-year low against New Zealand’s after the nation’s Reserve Bank said the Aussie is “still uncomfortably high.”
The local dollar has dropped more than 4 percent since the central bank’s meeting last month. It earlier gave up gains that came after reports today showing retail spending increased at a faster pace than forecast and exports added more to gross domestic product than anticipated. New Zealand’s kiwi climbed toward its strongest since May versus the yen amid speculation Japanese investors are seeking higher-yielding assets.
“The RBA would prefer the Australian dollar to weaken rather than to cut interest rates any further,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. “The jawboning is having an impact and keeping the currency lower than it otherwise would be, but that impact is limited.”
The Australian dollar fell 0.4 percent to 90.73 U.S. cents as of 5:51 p.m. in Sydney. It dropped as low as NZ$1.1096, the least since October 2008, and was little changed at 93.67 yen.
New Zealand’s currency changed hands at 81.71 cents from 81.86 yesterday. The kiwi rose 0.2 percent to 84.39 yen after touching 84.52, the highest since May 16.
“The Australian dollar, while below its level earlier in the year, is still uncomfortably high,” RBA Governor Glenn Stevens reiterated in a statement following the bank’s decision to keep interest rates unchanged at 2.5 percent. “A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy.”
The Aussie may bounce if the Federal Reserve delays its stimulus tapering beyond December, Chan said.
Stevens last month put traders on notice when he said that while the benefits of intervention haven’t “so far” outweighed the costs, it “doesn’t mean we will always eschew” sales. The currency will probably fall in the medium term, he said.
The currency gained earlier after data that beat economists forecasts. Retail sales rose 0.5 percent in October, compared with the median estimate for a 0.4 percent advance in a Bloomberg News survey, the statistics bureau said today. Net exports added 0.7 percentage point to GDP in the third quarter, compared with the survey estimate for 0.35.
The data was “mildly supportive” for the Australian dollar because it suggested that an economic transition is occurring away from a dependence on mining investment, said Joseph Capurso, a Sydney-based strategist at Commonwealth Bank of Australia, before the RBA decision.
Declines in the Aussie may be tempered with a technical indicator showing recent declines have been too rapid. The currency’s 14-day relative strength index versus the greenback was at 29.5 below the 30 level that signals a currency may be poised for a reversal.
Australia’s three-year bond yield rose two basis points, or 0.02 percentage point, to 3.13 percent. The 10-year rate climbed four basis points to 4.32 percent.