05.08.201307:08:00UTC+00U.S. dollar bolsters; Aussie at three-year low

The U.S. dollar edged higher Monday, paring losses made in the wake of below-consensus job growth, while the Australian dollar fell to a three-year low on the back of lackluster domestic data and ahead of a possible cut in the policy interest rate.

The ICE dollar index, which tracks the greenback’s movement against six rivals, pushed up to 81.966 from 81.934 late Friday in North America. The WSJ Dollar Index, which measures the currency’s moves against a slightly wider basket, climbed to 74.41 from 74.39.

Aussie hits three-year low

The Australian dollar downgraded to 88.60 U.S. cents, down from 89.01 cents late Friday.

At one point Monday, the currency declined as low as 88.46 U.S. cents — a level not seen since July 2010, according to FactSet data — after the Australian Bureau of Statistics said retail sales in June were unmoved from May. The reading was below an estimated rise of 0.4%, according to a Dow Jones Newswires poll of analysts.

Expectations are high that Australia’s central bank will further cut the country’s benchmark interest rate. Analysts largely expect a rate trim of a quarter-percentage point at Tuesday’s meeting to a new record low of 2.5%.

“With the economy still struggling and budget uncertainty escalating, more monetary stimulus is needed. This should ideally come in the form of both lower interest rates and a lower Australian dollar,” AMP Capital head of investment strategy Shane Oliver wrote Friday.

Economists at Nomura told clients that a rate cut this month “allows the [Reserve Bank of Australia] to be well ahead” of national parliamentary elections on Sept. 7, “while waiting means that the next window of opportunity would be the October meeting, which may be too far away.”

The RBA last cut the key rate in May, by a quarter percentage point.

The Aussie held around 88.60 cents after the HSBC China Services Business Activity Index for July came in at 51.3, a flat figure from June.

Though a figure above the 50 mark signals growth, HSBC called the current level “historically weak.” A government version of the services index, released Saturday, which showed an improvement to 54.1 from June’s 53.9 reading.

China is Australia’s largest export market, making Australian assets often sensitive to data from China.

Meanwhile, the New Zealand dollar decreased nearly 2% after China and Russia reportedly banned milk products from Fonterra Cooperative Group after the New Zealand dairy producer said this weekend it found bacteria that could result in botulism in some products.

There have been no reports of illness related to the products.