The Australian dollar traded near the weakest level in almost a month before a Reserve Bank policy decision today.
Australia’s three-year government bond yield, among the most sensitive to interest-rate expectations, was near the lowest since September as economists predict the central bank will keep borrowing costs at a record low following data last week that showed business investment fell more than expected. Demand for the Aussie and its New Zealand counterpart was also limited as continuing tension over Ukraine curbed demand for higher-yielding assets.
“If the RBA inserts some downbeat views on business investment following last week’s capital expenditure data, that might catch a few people off guard, so you might see some selling in the Aussie,” said Joseph Capurso, a Sydney-based currency strategist at Commonwealth Bank of Australia. “If we do get continuing escalation in the confrontation, you’d have to say Aussie would go down rather than up in response,” Capurso said in reference to the standoff in the Crimea region.
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