- Swaps traders trim odds the RBA will cut rates by May meeting
- Currency is up 6% from almost seven-year low in January
Australia’s dollar strengthened for a third day after a government report showed the economy expanded faster last quarter than analysts forecast.
The Aussie advanced versus 29 of its 31 major peers as swaps markets reduced the odds that the Reserve Bank of Australia will lower interest rates by its May meeting. The currency has jumped almost 6 percent against the U.S. dollar since dropping to its lowest level since 2009 in January.
The yen declined for a second day as demand for haven assets abated amid signs the global economic pessimism that dominated the first two months of the year was overdone.
“Investors seem to be viewing the glass half-full at the moment,” said Chris Turner, London-based head of currency strategy at ING Groep NV. “They’re focusing on the positives where Australia’s fourth-quarter GDP data today were above expectations. But conviction levels are pretty low based on the performance this year.”
The Aussie jumped 0.6 percent to 72.15 U.S. cents at 7:04 a.m. New York time, and appreciated 0.7 percent to 82.35 yen. Japan’s currency weakened 0.3 percent to 114.31 per dollar.
Australian gross domestic product increased 0.6 percent in the fourth quarter from the previous three months, when it rose an upwardly revised 1.1 percent, the Bureau of Statistics said. That compared with the median estimate for a 0.4 percent gain in a Bloomberg survey.
Australia showed “impressive figures given the commodity-price crash and general global financial-market conditions,” Derek Halpenny, the London-based European head of global markets research at Bank of Tokyo-Mitsubishi UFJ Ltd., wrote in an e-mailed note. It “certainly backs up the stance of the RBA to refrain from monetary easing. Today’s data will provide additional support for AUD/USD.”
RBA Governor Glenn Stevens left rates unchanged at a policy meeting Tuesday, repeating in his statement he was watching the labor market and the fallout from this year’s global financial market turmoil.
There’s a 43 percent probability the RBA will lower its benchmark rate from a record-low 2 percent by its May meeting, down from 55 percent odds before the GDP numbers were published, according to swaps data compiled by Bloomberg.
The Aussie earlier declined to as low as 71.65 cents after Moody’s Investors Service cut China’s credit-rating outlook to negative from stable, citing rising government debt, falling currency reserves and uncertainty over the ability to carry out reforms. The world’s second-largest economy is Australia’s biggest trading partner.