The Australian dollar fell after Reserve Bank Governor Glenn Stevens said the currency is “uncomfortably high” after he and his board refrained from cutting borrowing costs at a policy meeting today.
The Aussie slid versus all of its 16 major counterparts as Stevens made the comment after saying last week that the currency may become “materially lower.” New Zealand’s dollar weakened after Asian stocks reversed earlier gains.
“The RBA is still very much in a wait-and-see neutral stance,” said Greg Gibbs, a senior foreign-exchange strategist at Royal Bank of Scotland Group Plc in Singapore. “The currency is responding to comments similar to those made by Stevens last week.”
Australia’s currency fell 0.4 percent to 94.73 U.S. cents at 4:39 p.m. in Sydney after climbing 0.8 percent yesterday, the biggest advance since Oct. 17. It dropped 0.6 percent to 93.25 yen after touching 93.87, a one-week high. New Zealand’s kiwi dollar lost 0.2 percent to 82.70 U.S. cents after rising 0.2 percent yesterday. The MSCI Asia Pacific Index of shares slid 0.2 percent after climbing as much as 0.5 percent.
“The Australian dollar, while below its level earlier in the year, is still uncomfortably high,” Stevens said today in a statement. “A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy.”
The Aussie has risen 4.7 percent in the past three months against a basket of nine other developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, the biggest gain within the group. Its New Zealand counterpart has climbed 4.2 percent, the second-largest advance.
“Governor Stevens is set to warn that the strength of the currency could warrant further policy easing in the months ahead,” Mitul Kotecha, the head of foreign-exchange strategy at Credit Agricole SA (ACA) in Hong Kong, wrote in an e-mailed note to clients before the RBA decision. “However, such warnings may sound hollow given worries about house price inflation and recently firmer data.”
The statistics bureau said yesterday its house price index for Australia gained 7.6 percent in the third quarter from 12 months earlier, the steepest advance in three years. The trade balance probably shrank to a negative A$500 million ($474 million) in September from a A$815 million shortfall the previous month, according to the median economist forecast before tomorrow’s data.
The yield on Australian government debt due in a decade was little changed at 4.14 percent after reaching 4.16 percent yesterday, the highest since Oct. 17. Three-year government bonds yielded 3.12 percent from 3.13 percent yesterday.