Australia’s dollar fell to an 11-month low after the premium the nation’s bonds offer over U.S. debt shrank to the least in a year, sapping the allure of the currency as a higher-yielding asset.
The extra rate investors get by holding the South Pacific nation’s 10-year notes instead of similar-maturity Treasuries dropped to 1.27 percentage points yesterday, the lowest since June 2012. Yields on U.S. securities reached a two-month high this week amid speculation theFederal Reserve may consider tapering bond purchases as the economy improves.
“For the remainder of the week, the Aussie dollar will be quite heavy,” said Joseph Capurso, a Sydney-based foreign-exchange strategist at Commonwealth Bank of Australia, the nation’s biggest lender by market value. “The U.S. dollar will remain quite firm, I think U.S bond yields will continue to lift a bit further.”
The Australian dollar lost 0.3 percent to 98.63 U.S. cents as of 5:29 p.m. in Sydney after touching 98.52, lowest since June 12 last year. The currency extended its decline to an eighth day, the longest run of slides since August 2011. New Zealand’s currency was little changed at 81.90 U.S. cents.
The yield on Australia’s 10-year note gained three basis points, or 0.03 percentage point, to 3.27 percent today. Traders see about a 60 percent chance that the Reserve Bank of Australia will lower the benchmark rate within three months after cutting it to a record 2.75 percent on May 7, according to data compiled by Bloomberg on overnight-index swaps.
