Australia’s dollar fell after the Reserve Bank reiterated that an interest-rate cut is still an option and that weakness in the currency would aid the economy.
The nation’s two-year swap rate was near the lowest in 4 1/2 years relative to its New Zealand equivalent on speculation the Reserve Bank of Australia will cut borrowing costs already at a record low. New Zealand’s central bank has signaled it will raise its benchmark interest rate next year. The kiwi dollar rose against the Aussie before the smaller country’s government announces gross domestic product data this week.
“A soft exchange rate is what the RBA wants,” said Lee Sue Ann, a treasury economist at United Overseas Bank Ltd. (UOB) in Singapore. “Given the recent recovery in the Aussie dollar, I think the RBA is very careful not to close the door for rate cuts ahead.”
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