Australia’s dollar fell, snapping its longest winning stretch in seven weeks, before a report tomorrow that is forecast to show the nation’s unemployment rate rose to match the highest level since 2009.
New Zealand’s dollar also declined before the country’s Reserve Bank meets tomorrow with traders predicting 111 basis points of interest rate increases over a year, making the kiwi vulnerable to disappointment. Both South Pacific nations’ currencies may weaken as prospects of a bipartisan deal to ease budget cuts in the U.S. raised odds the Federal Reserve will trim stimulus at a meeting next week.
“The big risks for the Aussie and kiwi are tomorrow’s labor force data and the RBNZ meeting,” said Peter Dragicevich, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s biggest lender. “If the U.S. budget deal is passed this week, there is a growing chance that the Fed could begin to taper asset purchases at next week’s meeting and that could see the U.S. dollar pick up into year-end.”
The Australian currency slipped 0.2 percent to 91.30 U.S. cents as of 4:49 p.m. in Sydney after gaining 1.4 percent in the previous four sessions. It fell 0.3 percent to 93.81 yen and rose 0.3 percent to NZ$1.1036 after touching a five-year low of NZ$1.0950 on Dec. 9. New Zealand’s currency dropped 0.5 percent to 82.72 U.S. cents and declined 0.6 percent to 85 yen.
Australia’s unemployment rate probably rose to 5.8 percent in November while employers added 10,000 jobs, according to the median forecast in a Bloomberg News survey before tomorrow’s report.
Increasing unemployment amid the end of a record mining investment boom is eroding confidence. A consumer sentiment index declined in December to the lowest level in five months, according to a Westpac Banking Corp. and the Melbourne Institute survey released today.
“The December survey has revealed a distinct fall in confidence around the economy and a further deterioration around job security,” Westpac’s chief economist Bill Evans wrote in a research note. Central bank forecasts for below-trend growth mean there’s “a case for easier policy although, at this stage, the Bank clearly prefers to encourage a lower Australian dollar through ‘jaw boning’ rather than cutting rates.”
The Aussie has dropped 11 percent this year, the worst performance after the yen among 10 developed market peers tracked by Bloomberg Correlation Weighted Indexes. The kiwi has climbed 3 percent.
The Reserve Bank of New Zealand will keep its benchmark rate at a record low 2.5 percent tomorrow, a Bloomberg poll predicts. Policy makers will raise it to at least 3.5 percent in the coming 12 months, according to a Credit Suisse Group AG index based on swaps. The nation’s two-year swap rate was unchanged at 3.72 percent.
“We think the RBNZ will reduce its forecast interest-rate track due to the strength of the kiwi,” Dragicevich said. “If you get a paring back of those rates expectations, the kiwi may come under pressure.”
The Federal Open Market Committee will probably begin reducing $85 billion in monthly bond buying at the Dec. 17-18 meeting, according to 34 percent of economists surveyed on Dec. 6 by Bloomberg, an increase from 17 percent in a November poll.