Australian dollar hits five-month lows as market locks in two rate cuts

The Australian dollar reached five-month lows on Wednesday, as investors factored in two interest rate cuts this year, with a chance of a third in 2020.

Australian dollar Source: Bloomberg

It comes after Reserve Bank of Australia Governer, Phillip Lowe indicated that a cut is likely imminent on Tuesday.

Australian dollar price

The Australian dollar huddled near five-month lows, pinned at at $0.6883, just above its recent rough of $0.6865, at time of writing.

Markets have priced in an almost certain rate cut by the Reserve Bank of Australia (RBA), predicting a 1.5% cash rate decision when its board meets on June 4,.

RBA Governor Philip Lowe’s speech on Tuesday prompted all four of Australia's major banks to tip a June move. According to Reuters data, futures imply a 93% probability of a cut next month, and are fully priced for 1% by November.

Australian government bond futures reached historic peaks. The three-year bond contract dipped 1 tick to 98.815, while the 10-year contract lost 2.5 ticks to 98.3300.

New Zealand dollar price

The New Zealand dollar fell to its lowest in 7 months, dropping to $0.6500, affected by the markets betting on a cut in rates from the RBA.

This put pressure on the Reserve Bank of New Zealand to ease again. It comes after the New Zealand central bank cut rates to a fresh record low of 1.5% earlier in the month.

Meanwhile, New Zealand's benchmark S&P/NZX 50 index rose 0.1% or 10.78 points to 10,226.87.

Utilities provider Infratil rose 6.4% while dairy giant a2 Milk Co Ltd shares edged higher.


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