ANZ Cuts Australian Dollar Forecast; Deutsche Sells Currency

By Chris Young and Bob Chen

Aug. 5 (Bloomberg) -- Australia & New Zealand Banking Group Ltd., among the most bullish forecasters for the Australian dollar, cut its estimate for the currency after the central bank signaled it may reduce interest rates from a 12-year high.

ANZ, one of five banks among 31 surveyed by Bloomberg News to predict Australia's currency would trade one-for-one with the U.S. dollar this year, estimates it will trade at 92 U.S. cents by year-end from a previous forecast of $1.04. Commonwealth Bank of Australia said the currency has ``peaked'' and will lower its forecast in coming days. Deutsche Bank AG, the world's largest foreign-exchange trader, said it was selling Australia's dollar.

``Bad news has flooded the Australian dollar,'' Amy Auster, head of foreign exchange and international economics research in Melbourne at ANZ, wrote in a research note. ``Parity looks very difficult to reach from here and is no longer our central case scenario for the Australian dollar.''

The currency, known as the Aussie, slid to a four-month low of 92.12 U.S. cents after the Reserve Bank of Australia left its benchmark interest rate at 7.25 percent and flagged a possible reduction in borrowing costs to help the economy. Today's decision, which follows four rate increases in the past 12 months, was forecast by all 24 economists surveyed by Bloomberg.

`Less Restrictive Stance'

``With demand slowing, the board's view is that scope to move towards a less restrictive stance of monetary policy in the period ahead is increasing,'' RBA Governor Glenn Stevens said in Sydney after today's rate decision.

Deutsche Bank has gone ``short'' the Australian dollar at 92.50 cents with a target of it reaching 89 cents, Sydney-based currency strategist John Horner wrote in a client note. A short position is one that profits from a decline it the asset's value.

``Our forecasts had the Australian dollar reaching a peak of parity to the U.S. dollar at the end of the September quarter before depreciating into year-end,'' Richard Grace, chief currency strategist at Commonwealth Bank in Sydney wrote in a report today. ``We now believe it has reached a peak early in the September quarter and will be adjusting our forecasts.''

The Australian dollar reached a 25-year high of 98.49 cents on July 16 as rising commodity prices and the nation's interest- rate advantage fueled demand.

Australia's $1 trillion economy expanded at the slowest pace in almost two years in the first quarter. Since the central bank's previous meeting on July 1, reports have shown consumer confidence slumped in July to the lowest level in 16 years, lending to consumers and businesses rose at the slowest annual pace since 2002 and house prices fell in the second quarter for the first time in almost three years.

`More Rapidly'

``The Australian domestic economy, led by retail sales, credit growth and housing has slowed more rapidly than anticipated,'' Commonwealth Bank's Grace said. He had been forecasting the local dollar would end the year at 96 cents.

The Australian dollar was trading at 92.24 cents at 5:35 p.m. in Sydney, compared with 93.37 cents in late Asian trading yesterday. The median year-end estimate among analysts surveyed by Bloomberg is for 91 cents.

Investors are betting the central bank will cut its benchmark rate by 0.91 percentage point in the next 12 months, up from 0.65 percentage point yesterday, according to a Credit Suisse Group index based on interest-rate swaps. Policy makers last reduced borrowing costs on Dec. 5, 2001, when the Aussie was trading at about 51.59 U.S. cents.