Aussie Falls for 3rd Day Versus Dollar on Fed Taper Speculation

Australia’s dollar fell for a third day versus the greenback amid speculation U.S. payrolls data tomorrow will encourage the Federal Reserve to continue tapering stimulus that has boosted asset prices around the world.

The Aussie slid against all its major counterparts after a report yesterday showed U.S. hiring jumped last month by the most in a year. It weakened toward a five-year low versus the New Zealand dollar. Declines in Australia’s currency were limited after figures showed retail sales rose more than economists forecast.

“The market is positioned for a very strong U.S. payrolls number,” said Chris Weston, chief market strategist at IG Ltd. in Melbourne. “You’d probably be favoring a break to the downside” in the Australian dollar, he said.

The Aussie slid 0.3 percent to 88.72 U.S. cents at 5:18 p.m. in Sydney from yesterday, and fell 0.2 percent to NZ$1.0751. On Dec. 18, it reached 88.21 U.S. cents, the weakest since August 2010, and touched NZ$1.0733, a level unseen since October 2008. New Zealand’s currency lost 0.1 percent to 82.53 U.S. cents.

The Australian dollar fell 0.3 percent to 93.07 yen, while the New Zealand dollar declined 0.1 percent to 86.56 yen.

Australia’s currency will slide 10 percent to finish the year at 80 U.S. cents, according to Emirates NBD, the currency’s most accurate forecaster in 2013, as the Fed removes stimulus.

U.S. Jobs

Data tomorrow may show U.S. employers added 195,000 jobs last month after boosting positions by 203,000 in November, according to the median estimate in a Bloomberg News poll of economists. U.S. hiring jumped by 238,000 in December, the ADP Research Institute said yesterday.

“While the ADP results are not always a reliable guide for payrolls, they nevertheless improve the chances of an above-consensus payrolls result on Friday night,” National Australia Bank Ltd. analysts led by head of market research Peter Jolly wrote in a research note today. Declines in the Aussie may find a floor between 88.20 U.S. cents and 88.40, they wrote.

Australian retail sales advanced 0.7 percent in November from the previous month, when they rose 0.5 percent. Economists surveyed by Bloomberg predicted a 0.4 percent gain.

“Retail sales surprised to the upside yet again,” Su-Lin Ong, the head of Australian economic and fixed-income strategy at Royal Bank of Canada in Sydney, wrote in a note to clients. “The odds are that sales finished 2013 on a firm note.”

The Australian dollar has fallen 16 percent against the greenback in the past 12 months, the most after the yen among Group of 10 currencies. It has declined 14 percent against its New Zealand counterpart.

Diverging Policies

While the Fed pares stimulus, traders see 23 percent odds the Reserve Bank of Australia will cut its benchmark interest rate by its June meeting, according to overnight-index swaps data. Traders are certain of a gain in New Zealand’s borrowing costs over the same time period.

Residential building approvals declined 1.5 percent in November, the Australian Bureau of Statistics said today. In New Zealand, building permits jumped 11.1 percent in the month, the most since April, according to a report today.

The Aussie’s decline should extend to NZ$1.0730 over the next few days, Imre Speizer, a market strategist at Westpac Banking Corp. in Auckland, wrote in an e-mailed note to clients. The kiwi should strengthen toward 86.75 U.S. cents by the middle of this year as New Zealand’s central bank starts to tighten policy, he wrote.

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