SYDNEY/WELLINGTON, Mar 31: The Australian dollar nursed losses on Tuesday after a heavy spill overnight amid growing expectations that the Reserve Bank of Australia could cut interest rates against as early as next week. It was a touch softer on the day at $0.7642, after a slide of more than 1 percent overnight to as low as $0.7630. Traders said it is only a matter of time before the Aussie re-tests the six-year trough of $0.7561 set earlier this month.
Debt markets now imply a 72 percent chance of an quarter point cut in the 2.25 percent cash rate at the April 7 policy meeting, up from around 60 percent late last week. Persistent weakness in iron ore prices and worries about slower growth in China, Australia’s biggest export market, were seen as bolstering the case for a follow-up move to the February easing.
Against the yen, the Aussie hovered just above a six-week trough of 91.59. It was also languishing near an all-time low of NZ$1.0147 plumbed overnight.
Kieran Davies, an economist at Barclays, said he now favours a rate cut next week, while Westpac’s chief economist Bill Evans said he’s sticking to his call for an April/May cut.
‘For now, we are comfortable to continue to expect a rate cut next week of 0.25 percent to be followed by a period of stability marked by a clear easing bias,’ Evans wrote in a note to clients.
‘That bias will be maintained until the Bank gets a more accurate insight into the sustainability of its current 3.5 percent forecast for growth in 2016.’ The kiwi slipped 0.1 percent to $0.7498, taking losses into a sixth consecutive day as the commodity-linked currency fell in sympathy with the Australian dollar. An ongoing slide in the price of oil and other commodities kept the kiwi on the ropes versus the euro and sterling.
Against the greenback, the kiwi has retreated nearly 3 percent from a two-month high of $0.7698 hit last week, and risks losing more ground if the global price of milk, New Zealand’s biggest export earner, falls further at an auction later in the day.
New Zealand government bonds edged up, nudging yields 1 basis point lower across the curve.
Australian government bond futures held firm with the three-year contract reaching a fresh high of 98.350, up 3 ticks on the day. The 10-year contract put on 3 ticks to 97.6700.
(AGENCIES)
Follow our WhatsApp channel