Aussie Dollar Climbs as RBA Cut Bets Pared After Spending Data

Australia’s dollar rallied, erasing earlier losses, as traders pared bets the central bank will cut its key interest rate after data showed companies will continue to invest into next year.

The so-called Aussie dropped earlier after figures showed capital spending unexpectedly fell last quarter. New Zealand’s dollar strengthened after global stocks rallied and local data showed business confidence improved and building approvals decreased less than economists estimated. The yield on Australia’s 10-year debt rose from a five-week low.

“The information in the capital expenditure report is not enough to trigger a rate cut next week,” said Annette Beacher, Singapore-based head of Asia-Pacific research at TD Securities Inc. “The first piece of information was a weaker-than expected December quarter. The second piece of information we noticed was that 2013-2014 was stronger than expected. The Aussie seemed to have settled back at a slightly higher level after a violent movement.”

The Australian dollar added 0.4 percent to $1.0278 as of 4:26 p.m. in Sydney, after earlier falling as much as 0.4 percent. It touched $1.0184 yesterday, the lowest since Oct. 10. The Aussie jumped 0.6 percent to 94.93 yen. New Zealand’s dollar advanced 0.5 percent to 83.18 U.S. cents. The so-called kiwi rose 0.7 percent to 76.84 yen.

For the month, Australia’s currency was set for a 1.4 percent drop versus the U.S. dollar. New Zealand’s dollar was poised for a 0.8 percent decline.

Australian Yield

Australian companies forecast they will spend A$152.5 billion ($156.8 billion) in 2013-14, compared with an estimated A$168.2 billion in 2012-2013, the Bureau of Statistics said today in Sydney. Fourth-quarter capital spending fell 1.2 percent from the previous three-month period, when it rose a revised 1.1 percent. The median estimate of economists surveyed by Bloomberg News was for a 1 percent increase.

Interest-rate swaps data compiled by Bloomberg show traders see a 20 percent chance the central bank will lower its benchmark to 2.75 percent at the next meeting on March 5. That compares with 33 percent chance indicated yesterday.

“The RBA has an easing bias, but it doesn’t seem to have the desire to ease in the near term,” said Bill Diviney, Tokyo-based currency strategist at Barclays Plc. The decline in capital spending last quarter “wouldn’t be enough to change the RBA’s stance.”

The yield on Australia’s 10-year bonds rose one basis point, or 0.01 percentage point, to 3.35 percent from yesterday, when it touched 3.33 percent, the lowest since Jan. 25. The MSCI Asia Pacific Index of shares gained 1.4 percent, following a 1 percent jump by the MSCI World Index yesterday.

Aussie Overvalued

The RBA estimated in August that most models including those used by the central bank and International Monetary Fund, suggested the local dollar could be 4 percent to 15 percent overvalued, according to a document for its September board meeting released today in response to a Freedom of Information Act request by Bloomberg News.

Governor Glenn Stevens acknowledged last week that the currency was “somewhat too high,” while saying he’d need to be confident the currency is “seriously overvalued” before considering intervention to weaken it.

“The report was from last year, so it’s not the RBA’s current view,” said Joseph Capurso, a Sydney-based foreign-exchange strategist at Commonwealth Bank of Australia. “This doesn’t mean the RBA is going to start intervening in the exchange rate.”

The National Bank of New Zealand’s business confidence index rose to 39.4 from a month earlier. Permits for dwellings fell 0.4 percent to 1,557 in January from 1,564 in December, Statistics New Zealand said in Wellington today. Economists in a Bloomberg survey had forecast a 2 percent drop.

Before it's here, it's on the Bloomberg Terminal.