Australian Dollar Drops to Nine-Week Low as More Rate Cuts Seenby
The Australian dollar fell to a nine-week low after the Reserve Bank forecast core inflation is unlikely even to reach the bottom of its target this year, driving three-year yields to a record low on bets there’s more room for interest rates to drop.
The Aussie slid against all of its 16 major counterparts after the central bank, in its quarterly statement Friday, said underlying inflation is expected to be 1 percent to 2 percent 2016, down from the 2 percent to 3 percent it projected in February. The currency headed for its third weekly decline, the longest losing streak since November, following the RBA’s decision to cut its key rate to a record 1.75 percent on Tuesday.
“Inflation running at the bottom of the band as a base case is rather uncomfortable,” Sean Callow, a senior foreign-exchange strategist at Westpac Banking Corp. in Sydney, said via instant message. “Aussie-dollar trading ranges for the rest of the year just ratcheted lower.”
Australia’s dollar slid 0.9 percent to 73.97 U.S. cents as of 4:12 p.m. Friday in Sydney, according to prices compiled by Bloomberg. It reached 73.82, the lowest level since March 4. The currency has dropped 2.7 percent this week, the most since the period ended Jan. 8.
“All of a sudden the market is thinking that 1.50 percent might not be the low on the RBA cash rate," Callow said.