Aussie Weakens as Continued Taper, Investment Drop Curb Demand

The Australian dollar was set for a second week of declines as prospects of continued reduction in U.S. monetary stimulus and weaker-than-expected local business investment data damped demand for the currency.

The Aussie slid versus most of its 16 major counterparts this week after Federal Reserve Chair Janet Yellen signaled the central bank will press on with tapering bond purchases that have buoyed higher-yielding assets globally. New Zealand’s currency touched the strongest in six weeks after a private report business confidence climbed to the highest in almost 20 years.

“We’re shifting back into an environment in which you’d want to sell into Aussie rallies,” says Todd Elmer, a Singapore-based currency strategist at Citigroup Inc. “In the weeks ahead, the medium-term downtrend in the Aussie is likely to reassert itself.”

The Australian dollar lost 0.1 percent to 89.55 U.S. cents as of 4:59 p.m. in Sydney, extending its weekly drop to 0.3 percent. It has risen 2.3 percent this month. New Zealand’s kiwi climbed to 84.14 U.S. cents, the highest since Jan. 14, before trading at 83.87, 0.2 percent higher than yesterday. It’s gained 1.3 percent since Feb. 21 and is headed for a 3.7 percent monthly advance.

Australia’s 10-year government bond yield dropped to as low as 4.01 percent, a level unseen since Feb. 5. The yield on debt due in three years touched 2.82 percent, the lowest since Feb. 4. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates that are sensitive to interest-rate expectations, rose two basis points to 3.82 percent.

Weaker Indicators

The statistics bureau in Sydney said yesterday capital spending in Australia fell 5.2 percent in the three months ended December, the biggest decline since 2009. A report today showed private-sector credit growth eased in January.

Reserve Bank of Australia officials will probably keep the cash rate at a record-low 2.5 percent when they meet on March 4, according to all 32 economists surveyed by Bloomberg News.

In New Zealand, a survey by Australia & New Zealand Banking Group Ltd. showed 70.8 percent of companies expect the economy will improve over the next 12 months, the highest since March 1994.

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