AUD/USD Drops Below 0.80 RBA Rate-Cut Bets Increase

The Aussie dollar’s slide below 80 U.S. cents for the first time since 2009 is being fueled by speculation the central bank will need to reduce borrowing costs from a record low.

The Bank of Canada’s surprise interest-rate cut and the European Central Bank’s quantitative-easing program have raised the odds of looser monetary policy in Australia. Traders on Thursday saw a 40 percent chance the Reserve Bank of Australia will cut rates at this year’s first policy meeting on Feb. 3, up from 25 percent odds on Jan. 16, according to overnight interest rate swaps. Currency traders turned the most bearish on the Aussie in more than a year, options show.

While Australia’s central bank has kept its key rate at 2.5 percent for 17 months, the benchmark is at least 1.25 percentage points higher than any other major developed economy outside New Zealand. Australia has been struggling with the end of a once-in-a-century resources boom and a slowdown in China, which buys more than 35 percent of its overseas shipments.

Bloomberg

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