Traders are betting Australia’s dollar will extend its biggest decline in five years as policy makers flag that intervention to weaken the currency is an option, 30 years after they dropped exchange controls.
The dollar fell versus the euro and the yen after Federal Reserve Chairman Ben S. Bernanke said the central bank’s main interest rate will probably remain near zero for a “considerable time” after asset purchases end.
The euro retreated from an eight- month high versus the dollar before the European Central Bank meets today for the first time since President Mario Draghi said he’s ready to inject cash into the banking system.
The Australian dollar held it’s biggest one-day drop against the yen in a week as U.S. lawmakers remained at impasse on how to end a government shutdown and raise the debt limit, damping demand for higher-yielding assets.
Australia’s currency climbed against 15 of its 16 major counterparts after data on China’s manufacturing surpassed economist estimates, boosting prospects for the South Pacific nation’s commodity exports.
The yen slid versus all its major counterparts as Asian stocks rose and the extra yield investors receive from U.S. securities climbed to the most in four months, damping the allure of Japan’s currency.
The Australian and New Zealand dollars dropped to the weakest this year against the greenback and the yen as concerns about the impact of the nuclear disaster in Japan spurred investors to sell riskier assets.