Australian Dollar Falls as Consumer Prices Damp Rate Prospects

Oct. 28 (Bloomberg) -- The Australian dollar fell after annual consumer prices slowed in line with economists’ expectations, prompting speculation the central bank may temper the pace of interest rate increases.

New Zealand’s currency dropped for a fifth day before a central bank meeting tomorrow where policy makers may hold interest rates at a record low. Annual consumer price inflation in Australia slowed to 1.3 percent in the third quarter from 1.5 percent. Economists in a Bloomberg survey forecast 1.2 percent.

“The market was going into this thinking the risks were to the upside in terms of the consensus forecasts,” said Robert Rennie, currency research head in Sydney at Westpac Banking Corp. “This isn’t a strong enough piece of data to see the Australian dollar gain. We are in a short-term corrective phase.”

Australia’s currency fell 0.2 percent to 91.48 U.S. cents as of 11:52 a.m. in Sydney from 91.66 cents in New York yesterday when it touched 91.22 cents, the least since Oct. 19. The currency fell 0.4 percent to 83.80 yen.

New Zealand’s dollar declined 0.2 percent to 74.29 U.S. cents from 74.42 cents in New York yesterday. It earlier dropped to 74.13 cents, also the weakest since Oct. 19. The so-called kiwi slipped 0.4 percent to 68.06 yen.

Benchmark interest rates are 3.25 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

An Australian index measuring the number of jobs available for skilled workers rose 1.9 percent in October from September, a government report showed today.

Australian government bonds advanced. The yield on 10-year notes fell four basis points, or 0.04 percentage point, to 5.65 percent, according to Bloomberg data. The price of the 5.25 percent security due March 2019 gained 0.256 to 97.114.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.71 percent from 4.73 yesterday.