The Australian and New Zealand dollars weakened as falling Asian stocks sapped demand for higher-yielding assets amid prospects the Federal Reserve will signal this week a willingness to raise U.S. interest rates.
The Aussie was the biggest loser among 16 major currencies after the Reserve Bank of Australia said in minutes of its March 1 meeting that weak wage growth provides scope for it to cut interest rates further. The kiwi is down 1.3 percent over the past week after New Zealand’s policy makers unexpectedly lowered interest rates on March 10. The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, climbed for a second day before the Fed sets policy Wednesday.
“We’re still optimistic on the big U.S. dollar outlook,” said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand in Auckland. “What we’ve seen over the last 24 hours is that markets are coming to the conclusion that the Fed on Thursday is unlikely to deviate from the business-as-usual approach which they’ve had since December — that it’s based on the data, that it’s going to be gradual normalization, and right now the data is supporting a continuation of gradual normalization.”
Australia’s dollar fell 0.3 percent to 74.89 U.S. cents as of 10:24 a.m. in Tokyo Tuesday, while New Zealand’s currency declined 0.3 percent to 66.57 cents. Both dropped for a second day. The Bloomberg Dollar Spot Index advanced 0.1 percent.
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