Australian Dollar Lower as Bets Firm on Rate Cut

 
   By James Glynn 
 

        SYDNEY--The Australian dollar was lower Monday as investors prepared for the outcome of a policy meeting at the Reserve Bank of Australia on Tuesday.
        Bets on a 25 basis-point rate cut have firmed since last week, with futures markets now reflecting an 80% likelihood that the cash-rate target will be lowered by one quarter of a percentage point to a record low 2.0% from 2.25% now.
        The currency was trading well above 80 U.S. cents last week when the betting on a cut was far less certain.
        Most economists are expecting an interest-rate cut, with the RBA to justify the decision on the basis of a soft economic-growth outlook, still high unemployment, and tame inflation.
        The RBA will publish new economic forecasts on Friday amid strong expectation it will revise lower its growth expectations on a fall in commodity prices and an elevated Aussie dollar.
        At 0700 GMT Monday, the Australian dollar was trading at US$0.7826, down from US$0.7893 late Friday.
        "Given that the Bank kept its easing bias last time and said that further easing of policy may be appropriate over the period ahead, a rate cut cannot be ruled out at this meeting," said Marshall Gittler, head of Global FX Strategy at IronFX Global.
        "Australia's deteriorating economic outlook, with the CPI rate having declined further in the first quarter, puts additional pressure on the bank to take further action," he added.
        Earlier Monday, data on the economy was upbeat.
        According to ANZ Bank's monthly survey, the number of job adverts on the internet and in national newspapers rose by 2.3% from March.
        "After slipping lower in March, job advertisements posted a solid rebound in April," said Warren Hogan, chief economist at ANZ.
        Newspaper advertising fell by 2.5% in April, with an offset coming from internet-advertised jobs, which gained 2.4%. The latest data comes after government figures showed employment rising strongly in March--lowering the jobless rate and painting a better overall picture of the economy.
        Meanwhile, the number of Australian home-building permits rose in March, driven by demand for apartments and fueled by the first cut in interest rates in a year and a half. Approvals to build or renovate houses and apartments rose 2.8% on month, and 23.6% from a year earlier, the Australian Bureau of Statistics said.
        In February, the central bank lowered the official cash rate to a record low of 2.25%, and signaled afterwards that at least one more cut this year may follow. Building approvals and housing construction are among the few bright spots in an economy that continues to grow at a lackluster pace.
        Write to James Glynn at james.glynn@wsj.com
        (END) Dow Jones Newswires

        May 04, 2015 03:30 ET (07:30 GMT)

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