Bloomberg News

Aussie Drops After China Economy Slows More Than Forecast

April 13, 2012

Australia’s dollar declined from a one-week high after data showed economic growth in China slowed more than economists forecast, fanning concern demand from the South Pacific nation’s biggest trade parter will ebb.

The so-called Aussie weakened against all of its 16 major counterparts amid speculation the Reserve Bank of Australia will reduce interest rates to prop up the economy. New Zealand’s dollar rose as Asian stocks extended a global rally.

“The market is still surprised,” Sue Trinh, a senior foreign-exchange strategist at Royal Bank of Canada in Hong Kong, said about the data on China’s gross domestic product. “We’re going to be watching at any increase in speculation of monetary policy easing by the Chinese authorities, which may at least help to prevent a deeper retracement in the Aussie.”

Australia’s dollar fell 0.4 percent to $1.0392 as of 3:36 p.m. in Sydney from yesterday in New York. It earlier touched $1.0453, the highest since April 3 and is headed for a 0.8 percent advance this week, the biggest gain since the five days ended Feb. 3. The Aussie slid 0.3 percent to 84.22 yen.

New Zealand’s currency touched 83.20 U.S. cents, the strongest since March 2, before trading at 83, 0.3 percent above yesterday’s close. It rose 0.5 percent to 67.26 yen.

China’s GDP expanded 8.1 percent in the three months ended in March from a year earlier, the least in almost three years, the National Bureau of Statistics said in Beijing today. The median estimate in a Bloomberg News survey of 41 economists was 8.4 percent. Industrial production rose at a faster pace in March while retail sales growth accelerated, the data showed.

Risk Currencies

“The market’s skew was definitely looking for a stronger number,” Jonathan Cavenagh, a Singapore-based currency strategist at Westpac Banking Corp. (WBC), Australia’s second-biggest lender, said of China’s GDP figure. “The knee-jerk reaction has been to sell risk currencies,” including the Aussie dollar.

The Australian dollar has fallen 2 percent in the past month, the worst performance among 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. Norway’s krone has declined 1.8 percent, the second-biggest loser, while the kiwi has risen 0.6 percent.

Australian bonds have gained this week, pushing down the yield on 10-year debt to 3.85 percent from 4.06 percent on April 5, before the Easter holidays. The extra yield investors demand to hold New Zealand’s 10-year government debt over similar maturity Australian securities rose to 37 basis points, the most since Oct. 4. The yield on Australia’s three-year bonds has fallen to 3.26 percent and is set for a fourth week of declines, the longest streak since November.

Australian government securities “remain one of the world’s ‘cleanest dirty shirts’ for risk-averse investors, especially as the federal budget moves back into surplus and issuance levels reduce,” Robert Mead, a Sydney-based portfolio manager at Pacific Investment Management Co., wrote in an e- mailed note today. Pimco runs the world’s largest bond fund.

The MSCI Asia Pacific Index (MXAP) of stocks advanced 0.9 percent following a 1.4 percent rally in the MSCI World Index yesterday.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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