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A$ hit by soft data & rate cut expectations

australian-dolarSYDNEY/WELLINGTON: The Australian dollar took a hit across the board on Monday after soft retail sales data added to expectations of another interest rate cut at home this week, dragging the kiwi dollar lower as well.


Aussie dips a third of a cent to one-week lows of $1.0395 after retail sales came in flat for Oct vs an expected rise of 0.4 pct.


Last at $1.0404, with support seen at $1.0390, the 100-day MA, ahead of $1.0365.


Other Australian data showed job ads fell for an eighth month in November and a private gauge of inflation eased.


All of which add to the case of a quarter point rate cut anticipated on Tuesday. Interbank futures implying a three-in-four chance of an easing to 3 pct, to match the record low reached during the global financial crisis. Swap markets put an 89 pct chance.


The New Zealand dollar eases to $0.8170 from $0.8214, dragged lower by its Australian counterpart.


Support seen initially at $0.8160, while near term resistance is seen at $0.8220 and then $0.8237.


New Zealand terms of trade dip to their lowest in nearly three years in the third quarter as exports ease further than imports, although bumper production sees a 9.7 pct surge in export volumes.


Reserve Bank of New Zealand widely expected to keep rates unchanged at 2.5 percent later this week, although some investors have priced in the small possibility of a cut. Focus will be on what signals RBNZ sends given economic sluggishness. Dovishness would be seen as a negative for the kiwi.


Euro jumps to one-month highs against the Antipodeans. Last at A$1.2505, having gained 0.5 pct on the day. Euro climbs to a five-week peak of NZ$1.5912, up 0.6 pct on the day.


Australian government bonds firmer with three-year contract up 0.01 points at 97.400, while the 10-year contract adds 0.02 points to 96.940.


New Zealand government bond yields a tick lower along the curve.


Copyright Reuters, 2012


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