By Mariko Ishikawa - Jan 24, 2012 12:15 PM GMT+0700
Australia’s dollar declined from the highest level in 12 weeks on speculation a report tomorrow will show gains in consumer prices are slowing, providing scope for the nation’s central bank to cut interest rates.
The New Zealand dollar halted a two-day advance amid expectations the Reserve Bank of New Zealand will keep interest rates at a record low at a policy meeting this week. Losses in the South Pacific nations’ currencies were limited on optimism European Union finance ministers meeting in Brussels are making progress in resolving the region’s debt crisis, supporting demand for riskier assets.
“Without the pressure of inflation, interest rates have scope to come down,” said Derek Mumford, a director in Sydney at Rochford Capital, a currency-risk management company. “I think the RBNZ will adjust their rhetoric to suggest that they will cut rates if needed. It could take a little bit of edge off” the New Zealand dollar, he said.
Australia’s dollar declined 0.3 percent to $1.0492 at 3:41 p.m. in Sydney from yesterday in New York, when it touched $1.0573, the highest since Oct. 31. The so-called Aussie also fell 0.3 percent to 80.80 yen, snapping a five-day advance.
New Zealand’s dollar was little changed at 80.93 U.S. cents from 81.01 yesterday, when it reached 81.42, also the highest since Oct. 31. It slid 0.1 percent to 62.32 yen.
Consumer Prices
Australia’s consumer prices climbed 0.2 percent in the fourth quarter from the previous three-month period, according to economists surveyed by Bloomberg News before the Bureau of Statistics report tomorrow. That compares with a 0.6 percent gain in the third quarter.
An index of Australian leading economic indicators fell 0.3 percent to 128 in November, the New York-based Conference Board said in an e-mailed statement today. That follows a revised increase of 0.5 percent the previous month.
A Credit Suisse Group AG index based on swaps indicates an 84 percent chance that the Reserve Bank of Australia will lower rates by 25 basis points, or 0.25 percentage point, when policy makers convene Feb. 7. The benchmark rate is 4.25 percent following quarter-point reductions at each of the central bank’s two previous meetings.
A Statistics New Zealand report on Jan. 19 showed consumer prices in the country declined 0.3 percent in the fourth quarter from the previous three-month period, when they advanced 0.4 percent. All 14 economists surveyed by Bloomberg forecast the RBNZ to keep interest rates unchanged at 2.5 percent at the policy meeting on Jan. 26.
Excessive Gains
Demand for the South Pacific nations’ currencies was also limited as a technical indicator signaled their recent gains were too rapid. The New Zealand dollar’s 14-day relative strength index (MXAP) against the greenback was at the 70 level that some traders see as a sign that an asset may be about to reverse direction. The index for the so-called Aussie was at 65.
“This positive sentiment at the beginning of the year is quite fragile,” said Rochford’s Mumford. “If you see corrections in equity markets, you’ll see money coming out of the Aussie dollar.”
Standard & Poor’s 500 Index futures fell 0.4 percent. The MSCI Asia Pacific Index of stocks earlier rose as much as 0.3 percent before trading little changed from yesterday.
To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
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