Australia’s bonds fell and the currency slid after its biggest gain in eight months before the Reserve Bank releases its quarterly statement on policy this week after signaling a period of steady borrowing costs.
The dollar rose for a second day after retail sales gained more than forecast last month, adding to speculation the Federal Reserve will move to trim its $85 billion of monthly asset purchases at a meeting next week.
Australia’s dollar rose, paring its biggest annual slide since 2008, as investors eased bets on further declines in the currency, which has trailed only the yen as the worst performer among major peers this year.
Australia’s dollar dropped to a five-year low against its New Zealand peer after the nation’s central bank said it maintained the option of loosening policy further and the government’s budget deficit widened.
Australian home-building approvals fell in August by the most in three months and credit growth stalled, giving central bank Governor Glenn Stevens scope to delay a resumption in interest-rate increases.