(Updates with Aussie levels, Westpac rate decision)
The Australian dollar skidded half of a U.S. cent on Wednesday after the country's No.2 lender raised mortgage rates, spurring speculation the central bank will be forced to keep policy accommodative to offset such rate increases.
The Australian dollar AUD=D3 slipped to a day's low of $0.7299 soon after Westpac Banking Corp (WBC) said it would raise variable home loan rates by 14 basis points.
The currency was last down 0.4 percent at $0.7308. Some analysts predicted other banks would follow Westpac's move. That sparked speculation the Reserve Bank of Australia (RBA) will have to keep policy stimulatory for a long time to come to offset such increases.
The RBA last cut rates to a record low 1.50 percent in August 2016 and has repeatedly said there was no case for a hike in the near-term.
Interest rate futures
0#YIB: also pushed back the prospects of a hike with only a 40 percent chance of a 25 basis point increase seen in early 2020."It's important that monetary policy in Australia is still principally mediated by the RBA, but given the international pressures I think they (banks) will be looking for out-of-cycle rate increases," said Future Fund chairman and former Australian Treasurer Peter Costello.
"There's a point here, which is that the (housing) market's moderating, international rates are rising, credit is going to be harder to get. I think it is a time for a bit of prudence for house buyers."
The currency had a wild ride late last week amid a major political upheaval that saw the shock exit of Malcolm Turnbull as the country's prime minister.
The Aussie has since stabilised after Scott Morrison, a Turnbull ally, won the top position, although traders were still jittery about the fate of the ruling Liberal-National coalition in upcoming state and federal elections.
In addition, global protectionism continues to be a major overhang.
The United States and China held two days of talks last week without a major breakthrough as their trade war escalated with the activation of another round of duelling tariffs on $16 billion of each country's goods.
The deadline for public comment on U.S. President Donald Trump's increased tariffs on $200 billion of Chinese goods was Sept. 5.
The New Zealand dollar NZD=D3 fell in sympathy with its Australian cousin and was last down 0.1 percent at $0.6701.
Investors will keep a keen eye on ANZ Bank's business confidence data due Thursday. A downbeat result could hurt the currency, which has been on an uptrend since slumping to a 2-1/2 year trough in mid-August.
