The Aussie weakened against most of its Group of 10 counterparts before the Reserve Bank releases its October meeting minutes tomorrow. New Zealand’s interest-rate swaps were near a two-year high after a private report showed home prices climbed to a record. The Aussie erased a decline against the U.S. currency as Chinese stocks advanced, supporting demand for assets linked to global growth.
“There are still various factors which point to a weaker Aussie,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. “The Australian dollar is still quite high by historical standards and still looks like it’s at a point where it’s contractionary for the economy, so this year we are expecting a below-trend growth.”
The Aussie dropped 0.4 percent to NZ$1.1332 as of 4:53 p.m. in Sydney after sliding 0.3 percent on Oct. 11. It touched NZ$1.12 on Aug. 1, the lowest since October 2008. Australia’s currency was little changed at 94.66 U.S. cents, while New Zealand’s kiwi gained 0.4 percent to 83.54 U.S. cents.
The yield on Australia’s benchmark 10-year bond retreated one basis point, or 0.01 percentage point, to 4.12 percent. The three-year yield declined three basis points to 3.07 percent.
The number of loans granted to build or buy houses and apartments fell 3.9 percent in August from a month earlier, the statistics bureau said in Sydney. The median estimate in a Bloomberg News survey of economists was a 2.5 percent decline.
RBA Governor Glenn Stevens and his board kept the overnight cash-rate target at 2.5 percent on Oct. 1, saying the Aussie is still lower than in April even after recent gains.
The Australian dollar’s value against the currencies of the nation’s trade partners peaked at 80.2 on April 12 and has since fallen to 72.3, according to central bank data. It’s still stronger than the five-year average of 71.4.
“The Reserve Bank of Australia minutes will be watched closely following the central bank’s decision to stop characterizing the Australian dollar as ‘high,’” Mansoor Mohi-uddin, the Singapore-based head of foreign exchange strategy at UBS AG, wrote in a note to clients on Oct. 12. “But AUDNZD is unlikely to rise significantly higher given the Reserve Bank of New Zealand is set to start hiking interest rates from 2014.”
A price index of New Zealand homes rose 0.8 percent in September from a month earlier to an all-time high, figures from the Real Estate Institute of New Zealand showed today. Two-year interest rate swaps were at 3.52 percent today after reaching 3.58 percent on Sept. 18, the highest since August 2011.
China’s overseas shipments fell 0.3 percent last month from a year earlier, while imports climbed 7.4 percent, official figures showed on Oct. 12. The median estimates of economists in a Bloomberg survey were for a 5.5 percent increase and 7 percent gain, respectively. China is Australia’s biggest export market.
The Shanghai Stock Exchange Composite Index (SHCOMP) advanced 0.6 percent after a 1.7 percent jump on Oct. 11. U.S. stocks will trade on the federal Columbus Day holiday today, while bond markets are closed. Japan is shut today for a holiday.
Chart: WorldWideMarkets Alpha Trader