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July 30th, 2013 
Peter Nolan
THE Australian dollar is lower after Reserve Bank governor Glenn Stevens hinted there could be another cash rate cut next week.
At 1700 AEST the local unit was trading at 90.63 US cents, down from 92.45 cents on Monday.
The futures market is now pricing in an 89 per cent chance that the RBA will cut the cash rate next week following Mr Stevens’ speech to The Anika Foundation Luncheon in Sydney on Tuesday where he said there were signs of previous cuts working in the economy, but not enough to prevent further cuts.
At 1311 AEST, soon after he began speaking at the function, the Australian dollar hit 90.92 US cents, down from 91.63 US cents at 1300 AEST.
The local currency had already fallen on Tuesday after the release of weaker than expected building approvals data.
Easy Forex currency dealer Tony Darvall said Mr Stevens’ comments gave the Aussie dollar a smacking.
“Because he’s the governor and he was so blatant in talking the Aussie down, traders who were already bearish on the Aussie dollar just took it as a free hit,” Mr Darvall said.
“He said he’s not surprised by the fall in the Aussie dollar and wouldn’t be surprised if it fell further and there’s still scope to ease monetary policy, and so the market took that as an open invitation to sell.
“He really opened the door for another rate cut in August. It was pretty bearish stuff.”
At 1700 AEST, the Australian dollar was at 89.14 Japanese yen, down from Monday’s close of 90.55 yen, and at 68.35 euro cents, down from 69.68 euro cents.
Meanwhile, Australian bond futures prices rallied on the disappointing building approvals data and the comments by Mr Stevens, even if the comments were over-interpreted, said CMC Markets chief market strategist Michael McCarthy.
“I am amazed, because looking at the statement itself, I think it’s extremely balanced and I find it very hard to detect a bias or even a change of position from the RBA in these comments,” Mr McCarthy said.
“I don’t think it’s leaning either way.
“It is such an even-handed statement that if you read it with one eye closed, you can find a case for either lifting rates or dropping rates, but if you read it with both eyes open, I think any fair-minded reading would suggest that it was a very neutral statement.
“It’s really an expression of the market finding what it wants to.”
At 1630 AEST on Tuesday, the September 10-year bond futures contract was trading at 96.290 (implying a yield of 3.710 per cent), up from 96.255 (3.745 per cent) on Monday.
The September three-year bond futures contract was at 97.410 (2.590 per cent), up from 97.350 (2.650 per cent).
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