Australian Dollar Falls to Six-Month Low Before RBA Statement

By Chris Young

Aug. 11 (Bloomberg) -- The Australian dollar fell to a six- month low before the central bank releases its quarterly monetary statement.

The currency extended its slump from a 25-year high touched July 16 to 10 percent on speculation the Reserve Bank of Australia will cut interest rates when it meets next month to spur consumer spending. The Australian dollar also declined as an escalation in the conflict between Russia and Georgia encouraged safe-haven flows into U.S. assets.

``Speculation of an imminent RBA easing of as much as 50 basis points has grown before the monetary-policy statement,'' Sue Trinh, a currency strategist at RBC Capital Markets, said in Sydney. ``The Australian dollar is looking vulnerable. It's also suffering because of a resurgent U.S. dollar.''

The Australian dollar dropped to as low as 88.37 U.S. cents, the lowest since Jan. 31, before trading at 88.68 cents as of 8:42 a.m. in Sydney, compared with 88.85 cents in late New York on Aug. 8. It reached 98.49 cents on July 16.

Traders are certain the central bank will lower its overnight cash rate target of 7.25 percent by at least a quarter-percentage point on Sept. 2, according to a Credit Suisse Group index based on interest-rate swaps.

The Reserve Bank releases its quarterly statement at 11:30 a.m. in Sydney. Central bank Governor Glenn Stevens said last week there was ``scope to move towards a less restrictive stance of monetary policy'' because of slowing consumer demand.

The Australian dollar was one of 15 among the 16 most- traded currencies to drop against the U.S. dollar after Russia poured troops and tanks into South Ossetia in what it said was a response to Georgia's assault on civilians and Russian peacekeeping forces in the disputed region. Russian warplanes also bombed targets in Georgia.

Australian government bonds fell. The yield on the 10-year bond rose 3 basis points, or 0.03 percentage point, to 5.95 percent. The price of the 5.25 percent bond maturing in March 2019 declined 0.197, or A$1.97 per A$1,000 face amount, to 94.547. Bond yields move inversely to prices.

To contact the reporter on this story: Chris Young in Sydney at cyoung12@bloomberg.net.