Australia Dollar Extends Declines After RBA Leaves Door Open for Rate Cuts
The so-called Aussie also declined along with commodities on concern Europe’s debt crisis will weigh on global growth. New Zealand’s currency, known as the kiwi, touched the lowest in more than a month after data showed the country’s budget deficit widened more than the government had estimated.
“The RBA has kept an easing bias,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “The statement may have been more dovish than some people have expected. I see more downside to the Aussie.”
Australia’s dollar weakened 0.4 percent to $1.0624 as of 6:04 p.m. in Sydney, after touching $1.0604, the lowest since Feb. 23. The Aussie dropped 0.7 percent to 86.43 yen from yesterday, when it fell 0.9 percent.
New Zealand’s currency touched 81.33 U.S. cents, the weakest since Jan. 25, before trading at 81.54 cents, 0.7 percent below yesterday’s close. It declined 1 percent to 66.31 yen. It earlier touched 66.18 yen, the least since Feb. 20.
Reserve Bank of Australia Governor Glenn Stevens and his board left the overnight cash-rate target at 4.25 percent, the central bank said in a statement in Sydney today. The decision was forecast by all 25 economists surveyed by Bloomberg News.
Scope for Cuts
While the RBA said current settings are “appropriate for the moment,” there is scope for easier policy if demand weakens “materially,” according to the statement.
Traders expect the RBA will reduce borrowing costs by 40 basis points within a year, according a Credit Suisse AG index based on swaps. That compares with 104 basis points in cuts predicted on Feb. 1.
Australia’s government bonds advanced, with yields on 10- year debt dropping three basis points, or 0.03 percentage point, to 4.01 percent.
Greece is aiming to complete a bond exchange with private investors in order to receive a 130 billion-euro ($172 billion) bailout. It expects bondholders to accept the offer and is ready to force them to participate if necessary, Finance Minister Evangelos Venizelos said in a Bloomberg Television interview in Athens.
The MSCI Asia Pacific Index of shares slid for a second day, losing 1.1 percent. The Thomson Reuters/Jefferies CRB Index (CRY) of raw materials slid 0.5 percent yesterday.
Agriculture export earnings for Australia, the largest wool and beef shipper, may decline next fiscal year, the government’s commodity forecaster said today. A report in New Zealand showed that the nation’s budget deficit was NZ$473 million ($387 million) wider than forecast in the seven months through January after earthquake insurance liabilities exceeded expectations.
New Zealand Prime Minister John Key is forecasting the government will eliminate the shortfall by 2015 as it cuts spending and reduces debt by selling as much as 49 percent of four state-owned energy companies. Weaker world growth may curb revenue, reducing the 2015 surplus to a third the size it predicted in October, the government said last month.
Standard & Poor’s reiterated in its Asia-Pacific semi- annual review dated yesterday that New Zealand’s rating could face “downward pressure” if its fiscal situation continues to deteriorate.
S&P “hasn’t changed its view on credit quality of New Zealand,” said Kyran Curry, a Melbourne-based credit analyst at S&P. The ratings company said the outlook on AA foreign-currency rating is stable.
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