Australian dollar pinned near one-year lows ahead of RBA rate decision
THE Australian dollar stayed close to one-year lows on Monday and remained vulnerable to further losses as some investors bet the country’s central bank would take a dovish turn at a policy meeting this week.
The Aussie bounced 0.2 per cent to US$0.6400, having tumbled 2 per cent last week to as low as US$0.6373. It is within a whisker of a 13-month low of US$0.6349 and resistance is strong at multiple chart levels.
The kiwi also edged up 0.1 per cent to US$0.5834, after falling 1.6 per cent last week. Support is at the November low of US$0.5797. The local calendar is thin until GDP data that is due next week.
Among a slew of central banks set to meet this week, the Reserve Bank of Australia stands out as it was expected to counter the global easing trend to hold interest rates steady at 4.35 per cent on Tuesday. It has left rates unchanged for more than a year.
However, after economic growth surprised on the downside last quarter, markets have swung dovish and priced in earlier cuts from the RBA. Swaps are implying there is a 55 per cent chance of a cut in February, while a first cut is fully priced for April.
“The RBA won’t cut rates this week, but after last week’s weaker Q3 GDP print, the tone of the statement will be monitored closely,” said Chris Weston, head of research at Pepperstone.
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“Thursday’s employment report will therefore take on more significance than usual, with a weaker employment print likely pushing the implied probability of a 25 bp cut in Feb to around 75 per cent.”
The Aussie also suffered substantial losses last week against the Chinese yuan and the Japanese yen, down 1 per cent and 1.7 per cent, respectively. That together pushed the trade-weighted index to 60.8, about the lowest since February, which is likely to keep the RBA alert on its inflation watch.
Apart from the jobs data on Thursday, where forecasts are centred on a small tick up in the unemployment rate to 4.2 per cent, a slew of RBA officials will be making appearances this week.
Deputy Governor Andrew Hauser will deliver a speech on Australia and the global economy a day after the central bank’s decision, while assistant governors Brad Jones and Sarah Hunter will be speaking on Thursday and Friday.
In the bond market, three-year government bond yields fell 3 basis points to 3.791 per cent, extending the declines of the past three weeks. REUTERS
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