(Bloomberg) -- Australia’s dollar rose after the conservative Liberal-National coalition retained power in an election over the weekend.
The currency gained as much as 1% after Prime Minister Scott Morrison’s center-right government defied opinion polls and hung on to power. It pared the advance to trade up 0.4% at 68.98 U.S. cents as of 9:25 a.m. in Sydney, with investor focus shifting back from politics to the nation’s monetary policy, where bets have for an interest-rate cut have been rising.
“The coalition win has removed an uncertainty and so the move higher on the AUD this morning shouldn’t be a surprise,” said Rodrigo Catril, senior FX strategist at National Australia Bank Ltd. in Sydney. “That being said, we don’t expect the move to be longer lasting -- the Aussie’s fortunes are largely dependent on U.S.-China trade tensions and whether or not the Reserve Bank of Australia embarks on another round of monetary easing.”
Morrison’s center-right government will command a parliamentary majority, the Australian Broadcasting Corp. projected Monday as vote counting from the weekend election continues.
Despite trailing in most opinion polls, Morrison waged a relentless attack on the Labor Party’s progressive agenda to take action on climate change and strip tax perks from wealthy Australians. At the same time, the government ran on its record of economic management, across-the-board tax cuts and a return to a budget surplus.
Australia’s dollar has fallen more than 2% against the greenback this year amid slowing economic growth and an escalation of the U.S.-China trade war. The likelihood of the RBA cutting borrowing costs in June to stimulate the economy stood at 70% on Friday, according to overnight index swaps.
A speech by RBA Governor Philip Lowe on Tuesday titled ‘The Economic Outlook and Monetary Policy’ may be crucial given Lowe has previously used speeches to provide monetary policy guidance.
NAB recently brought forward its RBA rate-cut call to June from July, and sees potential for additional easing by early 2020. JPMorgan Chase & Co. senior strategist Sally Auld expects two rate cuts this year and said the RBA has enough data to justify a move next month.
The Aussie’s strength is “unlikely to be sustained as domestic interest-rate risks remain to the downside,” according to Cherelle Murphy, a Canberra-based senior economist at Australia & New Zealand Banking Group Ltd. “Locally, all focus will be on Tuesday’s RBA communications, with Governor Lowe talking and the May meeting minutes out.”
--With assistance from Michael G. Wilson and Shikhar Balwani.
To contact the reporters on this story: Ruth Carson in Singapore at rliew6@bloomberg.net;Matthew Burgess in Melbourne at mburgess46@bloomberg.net
To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, ;Edward Johnson at ejohnson28@bloomberg.net, Andrew Davis, Adam Haigh
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