Australia’s dollar slid the most in a week against the greenback after the nation’s trade deficit unexpectedly widened to a record.
The Aussie fell against all of its major peers as data Thursday showed retail sales stagnated in April, boosting the case for further interest-rate cuts by the Reserve Bank of Australia. Swaps traders are laying 48 percent odds of lower rates by year-end, from 43 percent probability a day earlier.
“The trade balance numbers were horrible,” sending the Aussie sharply lower, said Chris Weston, chief market strategist in Melbourne at IG Australia, a unit of IG Group Holdings Plc. “If we do start seeing a trend for a deterioration in the data, the RBA will cut rates again.”
The Australian currency fell 0.8 percent to 77.27 U.S. cents as of 7:01 a.m. in London from Wednesday, set for the biggest decline since May 28. It earlier dropped as much as 1 percent.
The RBA left its key rate unchanged at a record low of 2 percent on Tuesday -- as predicted by traders and analysts -- and was coy on whether further cuts would be needed. It reduced borrowing costs by a quarter point twice this year, after keeping policy on hold since mid-2013.
“Monetary policy needs to be accommodative” as the economy is likely to operate with spare capacity “for some time yet,” Governor Glenn Stevens said following the decision.
The trade gap widened to A$3.89 billion ($3 billion), surpassing the previous record in February 2008, as storms shut coal ports and limited shipments.
The weakest retail sales result in a year showed those at department stores fell 0.7 percent, a category of other retailing slid 1 percent and consumers spent 0.1 percent less on food.
“Today’s data continue to highlight a number of challenges for the Australian economy which suggest that a sub-trend pace of activity is likely to continue for some time,” Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada in Sydney, wrote in a client note.