Aussie Holds Gain After RBA Minutes as Macquarie Pares ForecastKevin Buckland
Australia’s dollar maintained an advance against its major peers after Reserve Bank policy makers reiterated a period of steady borrowing costs was likely.
The Aussie briefly rose to within 0.3 percent of a three-month high versus the greenback after the release today of minutes from this month’s RBA meeting, when the central bank held its benchmark rate at a record low. Australia’s government bonds declined, driving yields higher for a second day, after Macquarie Group Ltd. pushed back rate-cut forecasts.
“It’s a confirmation of what the RBA’s previously said, that they’re likely to keep rates on hold for a period of time,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. “That’s giving the Aussie underlying support.’
Australia’s dollar traded at 90.75 U.S. cents at 4:55 p.m. in Sydney from 90.87 yesterday, when it rose 0.7 percent. It earlier touched 91.10, the strongest since reaching 91.33 on March 7, a level unseen since Dec. 11. New Zealand’s dollar was at 85.59 U.S. cents from 85.65.
The Aussie is approaching ‘‘critical resistance levels,” where the 200-day moving average and a downward trendline from April’s high converge, Niall O’Connor, a New York-based technical analyst at JPMorgan Chase & Co., wrote in a research note yesterday. That intersection is currently at 91.49 U.S. cents, according to Bloomberg-compiled data.
“Upside breaks would confirm the onset of a deeper retracement,” O’Connor said. “Key initial support” exists at 88.90 U.S. cents, he said.
Australia’s currency has climbed 4.8 percent from a 3 1/2-year low of 86.60 U.S. cents reached on Jan. 24, helped by a strengthening domestic economy. It had previously fallen 18 percent since touching $1.0582 on April 11.
The economy expanded 0.8 percent in the final three months of 2013 compared with the previous period, when it grew 0.6 percent, according to statistics bureau data released on March 5. The median estimate of economists polled by Bloomberg News was for a 0.7 percent increase.
“There were further signs that low interest rates were providing support to activity,” the RBA said in minutes of its March 4 meeting, where it kept the benchmark cash rate at 2.5 percent. “The most prudent course was likely to be a period of stability in interest rates.”
“The decline in the exchange rate seen to date would assist in achieving balanced growth in the economy, though members noted that the exchange rate remained high by historical standards,” the minutes said.
Macquarie pushed back its RBA rate-cut forecast to the third quarter from the second and estimated 2.25 percent will be the terminal rate for the easing cycle, according to an e-mail from the lender today. Westpac Banking Corp. yesterday dropped its forecast for additional Reserve Bank easing, predicting a rate increase in the latter half of next year.
The yield on Australia’s 10-year government bond rose four basis points, or 0.04 percentage point, to 4.08 percent.