Reuters Australia
Aussie dollar lower vs USD, near 8-yr high vs kiwi
Thursday July 24, 11:54 AM
SYDNEY, July 24 (Reuters) - The Australian dollar fell to near two-week lows against the U.S. dollar on Thursday dragged down by lower commodity prices and growing expectations that local interest rates had peaked.
* A rate cut in New Zealand, the first in five years, also weighed down on the Aussie against the U.S. dollar, though it hit an eight-year high against the kiwi dollar at NZ$1.2905 on the reduction in New Zealand's yield advantage [nWEL287981].
* The CRB commodities index .CRB fell 1.66 percent to an 11-week low on lower crude oil and gold prices XAU=. Australia is a big exporter of commodities and has enjoyed strong gains in its terms of trade due to strong demand for its exports.
* The futures market CSRBA1Y=CSAU is factoring about a 70 percent chance of a rate cut by the Reserve Bank of Australia (RBA) in the next year after second-quarter inflation numbers were not high enough to reignite prospects of a rate rise here.
* Annual core inflation hit a 17-year high of 4.4 percent, but that was in line with expectations and, crucially, had already been flagged by the cental bank.
* By 9:25 a.m. (2325 GMT), the Aussie AUD= was at $9615/20 against the U.S. dollar, down from $0.9683/88 late here on Wednesday. It fell to as low as $0.9597, which was a two-week low and down 2.6 percent from a 25-year high of $0.9851 struck last week.
* Spreads between two-year Australian and U.S. government bond yields narrowed to 426 basis points from 435 points a day earlier, making high-yielding Aussie assets less attractive to investors searching for higher returns.
* The Aussie also eased to 103.77 yen AUDJPY=R from 103.95 yen late here on Wednesday, with investors wary of risky carry trades, despite firmer U.S. stock markets.
* Bond futures were higher, drawing support from the Reserve Bank of New Zealand's decision to cut interest rates and speculation the next rate move here could be lower given demand was cooling.
* Three-year Australian bond futures YTTc1 surged 0.07 points to 93.555, while the 10-year bond contract YTCc1 added by 0.035 points to 93.60. (Reporting by Anirban Nag; Editing by James Thornhill)
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