Australia dollar drops below 91 U.S. cents Aussie touches levels not seen since September 2010

By Carla Mozee, MarketWatch

LOS ANGELES (MarketWatch) — The Australian dollar fell to a nearly three-year low Wednesday on suggestions that further interest-rate cuts are in store, as the nation’s central bank seeks to aid the economy through a period of slowing.

The Australian dollar AUDUSD -0.6503% bought 91.08 U.S. cents compared with 91.43 U.S. cents late Tuesday in North America. The Aussie hit an intraday low of 90.92 cents, according to FactSet data, after having remained above the 91-cent mark since September 2010.

Shutterstock/Robyn Mackenzie
Australia’s currency falls after dovish comments from the central-bank governor.
In a speech Wednesday, Reserve Bank of Australia Gov. Glenn Stevens said the central bank “will be able to continue to do our part, consistent with our mandate, to assist the transition in sources of demand that is needed.” He made the comments in reference to helping strengthen and broaden economic growth, as investment in Australia’s mining sector is expected to peak soon.

Stevens said the RBA deliberated for a long time before Tuesday’s decision to hold the key rate at a record-low 2.75%.

“Cold comfort to those of us looking for a cut yesterday, but [Stevens’s comment] does provide confirmation (if anyone needed it) that the door is open for August, where we expect a 25-[basis-points] cut,” wrote RBC Capital Markets fixed-income and currency strategist Michael Turner on Wednesday.

Interest-rate cuts from the 4.75% level started in late 2011.

Stevens also said Wednesday that if the economy continues to slow, the currency will likely fall further. In a statement Tuesday, he said the Aussie “remains at a high level” despite its sharp drop since early April.

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Australian investors received mixed economic data Wednesday. Retail sales in Australia rose 0.1% in May, below expectations for a 0.3% increase. The trade surplus, meanwhile, widened to a better-than-expected 670 million Australian dollars ($615 million).

Among U.S. data due later Wednesday, meanwhile, ADP is slated to release private-sector payroll projections for June, and the Labor Department is scheduled to publish weekly jobless-claims numbers. Also, the Institute for Supply Management is due to report on activity at service-sector companies in June.

Ahead of the data, the U.S. dollar USDJPY -1.1332% bought 100.71 Japanese yen, up from ¥100.66 late Tuesday in North America.

The greenback on Tuesday pushed back above ¥100 for the first time since early June, with traders appearing more confident the U.S. Federal Reserve would move to slow the pace of monetary stimulus later this year.

The euro EURUSD -0.0775% fetched $1.2970, down slightly from $1.2974. The European shared currency fell below the $1.30 level ahead of an interest-rate decision due Thursday from the European Central Bank. The ECB is widely expected to keep rates on hold.

The British pound GBPUSD +0.6902% bought $1.5147, down from $1.5206.

The ICE dollar index DXY -0.12% , which measures the U.S. unit against six other major currencies, rose to 83.590 from 83.561 late Tuesday.

The WSJ Dollar Index XX:BUXX -0.28% , a rival gauge with a slightly wider comparison basket, rose to 75.51 from Tuesday’s level of 75.46.

Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
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