Thu, Apr 05, 2012 - Page 11 News List

Australian dollar falls on unexpected trade deficit

Bloomberg

The Australian dollar dropped against most major counterparts after the nation unexpectedly posted a trade deficit, adding pressure on the Reserve Bank of Australia (RBA) to cut interest rates as the economy slows.

The so-called Aussie touched an 11-week low after the RBA signaled a willingness on Tuesday to ease policy, while minutes showed the US Federal Reserve is holding off from additional stimulus in the US.

“There are some concerns that exports are really slowing and that’s pretty negative for the Aussie,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “It seems that the RBA is on the easing bias for now.”

The Australian dollar slid to US$1.0264, a level unseen since Jan. 16, before trading at US$1.0289 at 4:27pm in Sydney, 0.4 percent lower than Tuesday’s close.

Imports outpaced exports by A$480 million (US$494 million) in February from a revised A$971 million deficit the prior month, the Australian Bureau of Statistics said yesterday in Sydney. The median estimate in a Bloomberg News survey of 24 economists was for a surplus of A$1.1 billion.

The RBA said on Tuesday that its board “thought it prudent to see forthcoming key data on prices to reassess its outlook for inflation, before considering a further step to ease monetary policy.”

The central bank maintained the overnight cash-rate target at 4.25 percent.

Stimulus could be needed if the US economy “lost momentum,” minutes of the Fed’s March 13 meeting released on Tuesday showed. At that gathering, the central bank reiterated its pledge to keep interest rates “exceptionally low” at least through late 2014.

The Fed bought US$2.3 trillion of bonds in two rounds of so-called quantitative easing from December 2008 to June last year in a bid to boost the economy.

“Our economists note that the minutes have laid a marker for eventual altering of the ‘late 2014’ guidance,” Geoffrey Yu, a UBS AG strategist in London, wrote in a report yesterday.

The benchmark yield on Australia’s 10-year debt has fallen to 4.08 percent from 5.54 percent a year earlier. That is still the most among the eight countries that have the highest credit grades from all major rating companies with stable outlooks.

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