Australia’s dollar traded within a cent of an almost six-year low amid speculation the central bank will cut its key interest rate to an unprecedented low on Tuesday.
Three-year government bond yields dropped to a record as swaps traders priced in a better than 70 percent chance the Reserve Bank of Australia will reduce the overnight cash rate target by a quarter percentage point to 2 percent. Economists are less convinced: 17 of 30 surveyed by Bloomberg News predict that the central will keep rates unchanged. The Aussie rose Tuesday after a report showed that February retail sales climbed more than expected.
“Our view is they’ll probably go in May rather than today, but we’re not going to be surprised if they do choose to go today,” said Joseph Capurso, a Sydney-based strategist at Commonwealth Bank of Australia. “You could quite easily get a one-cent move either way.”