“Australia’s dollar fell against all of its major peers, erasing earlier gains, after the central bank signaled it’s prepared to cut interest rates to a record- low this year after holding them unchanged today.
The inflation outlook “would afford scope to ease policy further, should that be necessary to support demand,” the Reserve Bank of Australia said in a statement today after today’s policy decision. Australia’s bonds rallied and New Zealand’s dollar fell as declines in global stocks demand boosted demand for haven assets.
“Aussie selling pressure stems from the comments that the RBA made that inflation outlook gives scope for further easing,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “The market has taken that to mean the RBA is sitting ready to ease.”
RBC expects the next interest rate cut to come in the second quarter, according to Trinh.
The Aussie fell 0.3 percent to $1.0404 at 4:50 p.m. in Sydney from yesterday, after earlier climbing as much as 0.2 percent. It declined 0.3 percent to 96.12 yen, after touching 97.08 in New York, the highest since August 2008. New Zealand’s kiwi dollar slid 0.1 percent to 84.20 U.S. cents from yesterday. It was down 0.1 percent at 77.80 yen.
The yield on Australia’s 10-year bonds fell 10 basis points, or 0.10 percentage point, to 3.49 percent from yesterday, when it touched 3.61 percent, the highest level since May 2.
The MSCI Asia Pacific Index of stocks lost 0.9 percent, following a 1.2 percent decline in theStandard & Poor’s 500 Index (SPX) yesterday. The Stoxx Europe 600 Index (SXXP) dropped 1.5 percent yesterday.
