Aussie Gains With Higher-Yielding Currencies as RBA Holds Policy

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  • South Africa’s rand rises most among its major peers
  • Dollar extends drop on waning outlook for U.S. rate increase

Australia’s dollar rose with other higher-yielding currencies after the nation’s central bank kept interest rates steady and gave no indication that cuts would become necessary in the future.

The Aussie’s five-day gain, the longest since March, has added almost 2 percent to its value versus the greenback. South Africa’s rand led gains among major currencies, pushing its advance this month close to 4 percent, as data showed the economy avoided its second recession in seven years. The country’s relatively high main interest rate of 7 percent is meanwhile encouraging investors to shrug off concerns over the future of its finance minister and the management of key state companies.

In a world where an increasing number of government bonds yield less than zero, relatively high-yielding currencies such as the Aussie and rand have become particularly sought after. They’re also being spurred by waning bets on an imminent, dollar-boosting increase to Federal Reserve rates, after last week’s below-forecast payrolls data and a surprise slowdown in manufacturing. That leaves the door open to currency gains elsewhere as other central banks, such as the RBA, refrain from loosening policy.

“The RBA haven’t changed course at all,” said Jeremy Stretch, London-based head of foreign-exchange strategy at Canadian Imperial Bank of Commerce. On the rand, the gains have come even as “the local news doesn’t necessarily tend to be terrifically positive.”

Services Slow

The Aussie rose 0.5 percent to 76.21 U.S. cents as of 9:22 a.m. in New York. The rand strengthened 1.4 percent to 14.1906 per dollar. The euro climbed 0.2 percent to $1.1165, while the yen gained 0.1 percent to 103.30 to the greenback.

The dollar also declined versus all of the Group-of-10 currencies before a report today that’s forecast to show growth in services slowed last month, supporting the case for Fed officials to stay cautious on interest rates.

The prospect of a hike at the U.S. central bank’s Sept. 20-21 meeting fell to 34 percent in futures markets, from 42 percent at the end of the week before last, while the chance of a December increase dropped to 61 percent, from 65 percent.

RBA Governor Glenn Stevens held the cash rate target steady at 1.5 percent in his final meeting before retirement, as predicted by economists. The local dollar was also supported as Australia reported a lower-than-forecast current-account deficit, before the release of second-quarter economic growth data this week.