Aussie Falls to Weakest in Almost 3 Years Before U.S. Jobs Data
Australia’s dollar slid to the lowest in almost three years before U.S. jobs data that may add to the case for a reduction in Federal Reserve stimulus, which has supported higher-yielding assets globally.
The Aussie fell for a fifth day before Reserve Bank of Australia officials gather for a monetary policy decision next week, where they are expected to lower borrowing costs. New Zealand’s kiwi dollar held a four-day decline.
“The risk is that Aussie and kiwi do weaken on the back of a stronger payrolls number,” said Peter Dragicevich, a Sydney-based currency economist at Commonwealth Bank of Australia (CBA), the nation’s largest lender. Improving U.S. data “would just reinforce expectations that the Fed will begin to taper asset purchases over the next few months.”
The Australian dollar fell 0.4 percent to 88.92 U.S. cents as of 11:59 a.m. in Sydney and is set for a 4 percent slide this week, the most since September 2011. It touched 88.89 cents, the weakest since August 2010. It The kiwi was little changed at 78.90 U.S. cents. It’s headed for a 2.4 percent, five-day drop, the most since the period through June 21.
Australia’s 10-year government bond yield climbed nine basis points, or 0.09 percentage point, to 3.76 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose three basis points to 3.39 percent. .
The U.S. Labor department will probably say today employers added 185,000 jobs last month after boosting positions by 195,000 in June, according the median estimate of economists surveyed by Bloomberg News. The unemployment rate may have fallen to 7.5 percent, which would be the lowest since April.
Federal Reserve Chairman Ben S. Bernanke will trim the central bank’s monthly purchases of Treasury and mortgage debt to $65 billion in September, from the current pace of $85 billion, according to half of 54 economists polled by Bloomberg from July 18-22.
The Aussie has lost almost 12 percent in the past three months, the worst performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The kiwi had the second-biggest decline, falling 5 percent.
The RBA will probably cut Australia’s overnight cash rate target by 25 basis points to 2.5 percent at a policy meeting on Aug. 6, according to 26 of 27 economists surveyed by Bloomberg News. Traders agree, seeing a 94 percent chance of a reduction, according to interest-rate swaps data compiled by Bloomberg.
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