SYDNEY, Oct 1 (Reuters) - The Australian dollar weakened to a one-month low on Tuesday after the central bank cut rates to a record low, while its New Zealand counterpart stumbled after the country’s business confidence deteriorated in the September quarter.
The Australian dollar fell 0.5% after the Reserve Bank of Australia (RBA) lowered its cash rate by a quarter point to an all-time low of 0.75% and signalled willingness to do more if needed.
Twenty five of 35 economists polled by Reuters last week had expected the RBA to cut on Tuesday, its third such move this year following easings in June and July to revive growth and inflation.
But analysts were less convinced this will be enough to get the economy back up on its feet. Rates futures are pricing in a 60% chance of a fourth cut in November to 0.5%.
“Will this be enough to pull the Australian economy out of its current funk? That’s unclear. What is clear though is that existing policy wasn’t enough,” said Callam Pickering, APAC Economist at global job site Indeed.
“Quite simply, the economy requires more stimulus.”
The lower-for-longer rate view meant yields on two-year bonds slipped to 0.7%, the lowest in a month.
While Australia’s A$1.95 trillion economy has stayed recession-free for the last 28 years, economic risks have heightened over the past year with tepid economic growth and inflation, rising unemployment and a wobbly property market.
Data released earlier in the session showed Australian home prices posted their biggest monthly jump in 2-1/2 years in September, boosted by record low rates and looser lending rules.
However, approvals to build new homes collapsed to their lowest since 2013. Some economists expect construction-related job losses in coming months which could take the unemployment rate to as high as 5.5% from 5.3% now.
Australian government bond futures inched up, with the three-year bond contract up 4.5 ticks at 99.34. The 10-year contract added 2.5 ticks to 99.015.
Across the Tasman Sea, New Zealand dollar fell 0.4% to $0.6236, its lowest since September 2015 after a survey of businesses showed confidence fell last quarter.
A net 40% of respondent firms expected general business conditions to deteriorate, compared with 34% in the previous quarter, the New Zealand Institute of Economic Research’s (NZIER) quarterly survey of business opinion showed. nS9N24C01C]
Fragile business sentiment has dogged New Zealand’s economy for several months and was one reason the Reserve Bank of New Zealand (RBNZ) stunned investors by chopping the official cash rate by a larger-than-expected 50 basis points in August. (Reporting by Rushil Dutta in Sydney; Editing by Kim Coghill)