Aussie Falls Before RBA’s Stevens Speaks, Fed Meets This Week

Australia’s dollar fell ahead of Dec. 18 testimony from its central bank chief and a decision by the U.S. Federal Reserve on trimming stimulus.

The Aussie dropped last week after Reserve Bank of Australia Governor Glenn Stevens marked out 85 U.S. cents as a level he’d prefer for the currency. Minutes of the RBA’s last policy meeting are due tomorrow and Stevens testifies at a parliamentary economics committee the following day. New Zealand’s currency gained versus Australia’s as a gauge of consumer confidence in the smaller nation rose to the highest level since 2009.

“We could see some consolidation in the Aussie going into the Stevens testimony and the Fed meeting,” said Kara Ordway, a currency strategist at City Index Group Ltd. in Sydney. “In terms of risk appetite against the U.S. dollar, if you were going to look at any currency to make some gains, you would really pick the Aussie because it has been so weak compared to all the other majors. It all depends on Fed.”

The Australian currency slipped 0.1 percent to 89.53 U.S. cents at 4:52 p.m. in Sydney, after dropping 1.5 percent in the five days to Dec. 13 in its eighth-straight weekly decline. It slumped 0.5 percent to 92.03 yen. The currency fell 0.5 percent to NZ$1.0818 after dropping as low as NZ$1.0806 earlier today, the weakest since October 2008. The kiwi strengthened 0.2 percent to 82.77 U.S. cents and lost 0.2 percent to 85.07 yen.

Ordway sees support for the Aussie at 89 U.S. cents and sellers near 90.30 this week.

Australia’s dollar has dropped 12 percent this year, the steepest decline after the yen among 10 developed nation currencies tracked by Bloomberg Correlation Weighted Indexes. The kiwi has climbed 3.6 percent.

Stevens Comments

RBA Governor Stevens said last week that “it’s probably more preferable” to support the economy via a weaker currency than with further rate cuts. An exchange rate of 85 U.S. cents is “closer to the mark” than 95 cents, he said in an interview with the Australian Financial Review.

Interest-rate swaps data compiled by Bloomberg show traders see a 16 percent chance the RBA will lower its benchmark from 2.5 percent at the next meeting in February.

Futures traders increased bearish bets on the Australian dollar to the most in three months, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the Australian dollar compared with those on a gain -- so-called net shorts -- was 45,850 on Dec. 10, the most since the week ended Sept. 10, and compared with net shorts of 44,311 a week earlier.

Aussie Shorts

“Short positioning in the Aussie is getting a bit overstretched,” Divya Devesh, the Singapore-based foreign-exchange analyst at Standard Chartered Plc. “Towards the end of the year, there might be a some position unwinding.”

The Aussie will drop to the mid-80 cents range by June next year as domestic monetary policy diverges from that of the U.S., Devesh said. “In the U.S. we expect tapering next year, while the RBA we expect to cut. That should drive the Aussie lower.”

The median forecast of analysts surveyed by Bloomberg is for the currency to trade at 89 cents by the end of the second quarter of 2014.

The Fed will probably begin reducing $85 billion in monthly bond buying at the Dec. 17-18 meeting, according to 34 percent of economists surveyed on Dec. 6 by Bloomberg News, an increase from 17 percent in a Nov. 8 poll.

China Manufacturing

In China, a preliminary reading on the Purchasing Managers’ Index of manufacturing fell to 50.5 this month from 50.8 in November, according to the HSBC Holdings Plc and Markit Economics data today. That was lower than 50.9 median estimate of economist surveyed by Bloomberg. Numbers above 50 signal expansion. China is the biggest trading partner for both Australia and New Zealand.

Consumer confidence in New Zealand rose to 120.1 in the fourth quarter, according to a report by Westpac Banking Corp and McDermott Miller Ltd. A reading above 100 indicates that there are more optimists than pessimists.

New Zealand’s two-year swap rate, a fixed payment made to receive a floating rate, was little changed at 3.77 percent. The Reserve Bank of New Zealand left rates unchanged at 2.5 percent on Dec. 12.

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