BLBG:Australian Dollar Declines From Six-Month High on Retail Sales, Before RBA
Australia’s dollar fell from near a six-month high after a government report showed retail spending unexpectedly declined, adding to the case for the Reserve Bank to lower interest rates tomorrow.
The so-called Aussie weakened against the yen for the first time in five days as economists forecast RBA Governor Glenn Stevens will cut the benchmark rate for a third meeting, damping the appeal of the nation’s assets. The New Zealand dollar declined from the strongest in almost five months versus the greenback on speculation recent advances were too rapid.
“The market has got a high chance of a rate cut priced in for tomorrow and this number isn’t going to change that,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, referring to retail sales data. “If they do deliver a cut, the Aussie might fall, but the major push to the Aussie from the RBA is going to come from their statement.”
Australia’s dollar fell 0.4 percent to $1.0727 at 1:16 p.m. in Sydney from Feb. 3 in New York, when it touched $1.0794, the most since Aug. 2. The currency declined 0.4 percent to 82.14 yen. New Zealand’s dollar weakened 0.4 percent to 83.18 U.S. cents from last week and 0.5 percent to 63.69 yen.
Retail sales in Australia declined 0.1 percent in December from a month earlier, the first drop in six months, the Bureau of Statistics said today. The result compares with the median forecast in a Bloomberg News survey of economists for a 0.2 percent gain.
Risk of $1.20
Swaps traders are betting on a 73 percent chance that the RBA will lower its cash rate to 4 percent from 4.25 percent when policy makers meet tomorrow, according to a Credit Suisse AG index. A separate index shows 88 basis points, or 0.88 percentage point, in cuts predicted within 12 months.
Today’s declines pared to 5.1 percent the Aussie’s gains this year against the U.S. currency and to 4.6 percent its advance versus the yen. The New Zealand dollar has risen 7 percent and 6.5 percent respectively over that period.
“The Australian dollar has been much more tightly correlated with swings in global risk appetite and asset prices than it has domestic economic developments and RBA policy,” Todd Elmer, head of Group-of-10 foreign-exchange strategy for Asia excluding Japan at Citigroup Inc. in Singapore, wrote in a note to clients today. “With perceived tail risk from the European sovereign debt crisis diminishing despite concerns on a potential Greek default, this likely spells additional Australian-dollar appreciation.”
Elmer said it may be worth buying the Aussie on any declines after tomorrow’s decision with investors “too complacent” on risks for a gain to $1.20 and beyond.
The nation’s benchmark 10-year bond yield rose 10 basis points to 3.81 percent. The three-year rate rose 10 basis points to 3.31 percent.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
