Aussie Slumps With Kiwi on Bets Fed to Show Readiness to Tighten

The Australian and New Zealand dollars weakened as a slide in Asian stocks sapped demand for higher-yielding assets amid speculation the Federal Reserve will signal this week a willingness to raise U.S. interest rates.

The Aussie dropped for a second day as the Reserve Bank of Australia said in minutes of its March 1 meeting that weak wage growth provided scope for it to cut rates further. The kiwi has tumbled 1.2 percent in the past week as New Zealand’s policy makers unexpectedly lowered their benchmark on March 10. The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, held gains from Monday before this week’s Fed policy meeting.

“We’re still optimistic on the big U.S. dollar outlook,” said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand in Auckland. “Markets are coming to the conclusion that the Fed on Thursday is unlikely to deviate from the business-as-usual approach which they’ve had since December -- that it’s based on the data, that it’s going to be gradual normalization.”

Australia’s dollar fell 0.3 percent to 74.96 U.S. cents as of 6:57 a.m. on Tuesday in London, while New Zealand’s currency declined 0.2 percent to 66.62 cents. The Bloomberg Dollar Spot Index was little changed after climbing 0.4 percent on Monday.

There is a 78 percent probability the Fed will raise its benchmark rate by year-end, up from 30 percent odds a month ago, according to data compiled by Bloomberg based on fed fund futures.

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