Aussie Weakens Second Day as Westpac Move Boosts RBA Easing Bets

  • Currency falls against all 16 major peers as Asia stocks drop
  • Odds of November rate cut climb to 32% from 20% on Monday

Australia’s dollar fell for a second day after the nation’s second-largest lender raised its home-loan rates, prompting speculation the central bank will ease policy as soon as next month to counter the impact of higher borrowing costs on households.

The Aussie dropped against all of its 16 major counterparts after Westpac Banking Corp. said it will increase its variable home-loan rates from Nov. 20 along with announcing capital raising to meet stricter requirements. Australia’s dollar also declined as a slide in Asian stocks damped demand for higher-yielding assets. The Reserve Bank of Australia next meets on Nov. 3 after lowering rates twice this year.

“The market take on this is that it will push the RBA to cut rates perhaps quicker than the market had previously expected,” said Derek Mumford, a director at Rochford Capital Pty, a foreign-exchange risk-management company in Sydney. “That would tend to weaken the Aussie dollar.”

Australia’s dollar fell 0.1 percent to 72.36 U.S. cents as of 12:11 p.m. in Tokyo after advancing to 73.82 on Oct. 12, the highest level since Aug. 18. It had risen for nine straight days through Tuesday, the longest rally in more than six years.

The probability that the RBA will cut rates next month climbed to 34 percent from 20 percent on Monday, according to data compiled by Bloomberg based on swaps. Central bank Governor Glenn Stevens said last month policy makers were “pretty content” with the current level of policy rates.

The MSCI Asia Pacific Index of shares dropped 1.2 percent after falling 1 percent on Tuesday.

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