Australian dollar slid to the lowest level since 2011, with Australias interest rate advantage began to vaporize and Aussie allure dimmed. Insight Investment Management Ltd., operating with 134 billion US dollars in fixed income and currencies, has been selling the Australian dollar, with the yield spread between Australias sovereign debt and its major peers on the globe shrank by almost one half of the percent since March.
“The Aussie’s trend is clearly downward,” said Kengo Suzuki, chief currency strategist at Mizuho Securities Co. in Tokyo. He also added, “The Australian dollar remains susceptible to selling when markets are in a risk-off situation.”
AUD/USD pair declined by 1% to 0.9445, after it hit session low at 0.9433 during Asian trade, lowest value since October 4th 2011. Meanwhile, New Zealand dollar also registered a drop by 0.8%, as NZD/USD fell to 0.7910, after hitting a session low at 0.7900 during Asian trade.
The extra yield, which investors can achieve by holding Australia’s government bonds over their global peers was 1.6% yesterday, according to indexes compiled by Bank of America Merrill Lynch. This is comparable with an 11-month high of 2.07% on March 25.
Traders expect the Reserve Bank of Australia (RBA) to lower borrowing costs by 41 basis points in the next 12 months, according to Credit Suisse Group AG index based on swaps. Bloomberg reported, that the index registered 36 basis points of cuts yesterday. RBA left the overnight cash-rate target at a record low 2.75% at its meeting on June 4th.
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