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Aussie dips as retail data dims chance of Dec hike

Published: 03 Nov 2009 18:15:46 PST

__________AUSTRALIAN CREDIT/FOREX (0130 GMT) SNAPSHOT__________ FOREIGN EXCHANGE (against previous Sydney close) <AUD=> 0.9008/10 (0.9021/26) <AUDNZD=R>1.2522/31 (1.2487/05) <AUDJPY=R> 81.27/32 (81.41/48) <JPY=> 90.19/20 (90.23/27) <AUDEUR=R> 0.6115/20(0.6100/05) <EUR=> 1.4722/26 (1.4786/90) DEBT FUTURES CASH YIELDS 90-DAY BILL<YBAc1> (DEC) 95.90 (-0.03) <AU3MBB=RR> 3.60(3.60) 3-YR BOND <YTTc1> (DEC) 94.98 (-0.02) <AU3YT=RR> 4.91(4.87) 10-YR BOND <YTCc1> (DEC) 94.40 (-0.105) <AU10YT=RR> 5.65(5.52) 3/10 SPREAD +0.58 (+0.485) AUST/US 10-YR SPREAD +218(+210) S&P/ASX 200 4535.6 (4531.5) US10-YR <US10YT=RR> 3.47(3.42) ----------------------------Nov 4------------------------------

DATA: Australian retail sales eased 0.2 percent in September, well short of forecasts for a 0.4 percent rise. [ID:SYU008989]

Building approvals rose 2.7 percent, in line with expectations for a 2.5 percent gain. [ID:SYU008990] ---------------------------------------------------------------

* Aussie <AUD=D4> slipped after September's disappointing retail sales performance led investors to bet on a lesser chance of an interest rate rise in December.

* Sales of clothes, shoes and personal accessories suffered the biggest drop in September after the boost to spending from government cash handouts distributed in earlier months worn off.

* Aussie retreated to $0.9001, after falling to as low as $0.8980. It had traded at $0.9032 before the data release.

* December interbank futures <0#YIB:> reversed earlier losses and rose 0.005 points to 96.375, giving an implied rate of 3.625 percent.

* That meant investors are pricing in a 50 percent chance of a rate hike, down from 64 percent before the data.

* One-year over night index swaps <AUDOIS> pulled back to 4.3625 percent, from 4.395 percent before.

* The Reserve Bank of Australia raised rates by an expected 25 basis points to 3.50 percent on Tuesday, but sounded less hawkish than some investors had bet on.

* Australia's yield curve is steepening as investors remove some of their earlier bets on a sharply flattening curve.

* The implied yield spread of ten-year yields over three-year stood at 57.5 basis points. The cash yield spread stood at 74.5 basis points, a sharp rise from 41 basis points seen on Oct. 9.

* But Aussie bond futures stayed down, mirroring declines in U.S. Treasuries. * Three-year bond futures eased 0.02 points to 94.98, and the ten-year contract lost 0.095 points to 94.41.