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link to www.bloomberg.com]
Australia’s dollar touched the lowest in almost three years as bets the Reserve Bank will cut interest rates next week outweighed better-than-expected manufacturing data out of China, the nation’s biggest trading partner.
The Aussie pared earlier losses after government figures showed China’s manufacturing Purchasing Managers’ Index unexpectedly advanced last month. Traders’ projections for borrowing cost reductions in the coming year climbed to the most in 12 weeks before the RBA sets monetary policy on Aug. 6. New Zealand’s currency extended declines to a fourth day, set for the longest losing streak in more than a month.
“The initial reaction to the Chinese PMI was very positive for risk, particularly for the Aussie,” said Callum Henderson, the global head of currency research at Standard Chartered Plc in Singapore. “We’ve been bearish medium-term on the Aussie for quite some time. The weakness in the currency is due both to domestic and external factors.”
The Aussie dropped 0.2 percent to 89.60 U.S. cents as of 12:34 p.m. in Sydney, after falling as much as 0.6 percent to 89.27, the least since September 2010. New Zealand’s kiwi dollar lost 0.4 percent to 79.56 U.S. cents after declining 1.3 percent in the previous three days.
Australia’s two-year bond yield, among the most sensitive to interest-rate expectations, touched 2.28 percent, the lowest since July 2012. The yield on benchmark 10-year notes dropped six basis points to 3.66 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 3.34 percent.
Rate Bets
Interest-rate swaps data compiled by Bloomberg show traders see a 94 percent chance RBA Governor Glenn Stevens and his board will lower Australia’s overnight cash rate target by 25 basis points to 2.5 percent next week.
A Credit Suisse Group AG index based on swaps indica
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