Australia’s government bonds rose, sending three-year yields to an 11-week low, as investors added to bets the central bank will cut interest rates.
The Reserve Bank of Australia reiterated in the minutes released today of its meeting this month that the inflation outlook gives it room to cut borrowing costs and that the Australian dollar “remained high.” The so-called Aussie posted the biggest drop in 17 months yesterday after data showed economic growth in China slowed and manufacturing in New York region expanded less than analysts estimated.
“There will be some consolidation in the Aussie after a big move yesterday, but risk appetite has been severely hurt from the combination of weaker Chinese and U.S data,” said Derek Mumford, a director at Rochford Capital, a currency risk- management company in Sydney. “The short end of the curve has been very volatile over the past couple of months. Interest-rate expectation in Australia has turned.”