Bloomberg News

Aussie, Kiwi Dollars Rise, Pare Weekly Drops on China GDP

July 13, 2012

The Australian and New Zealand dollars rose, paring weekly losses, after a Chinese government report showed the nation’s economy grew in the second quarter.

Gross domestic product in China, Australia’s biggest trading partner and New Zealand’s second-largest export destination, expanded 7.6 percent from a year earlier, the National Bureau of Statistics said today in Beijing. Demand for the South Pacific currencies was also supported as Asian stocks reversed earlier losses after China’s announcement.

The Chinese GDP “came out just below the market consensus, which is a positive result,” said Jonathan Cavenagh, a strategist at Westpac Banking Corp. (WBC) in Singapore. “The growth momentum is still slowing down, so I wouldn’t jump the gun just yet. But we can probably see more of a short squeeze in the Aussie in the near term.”

Australia’s currency rose 0.2 percent to $1.0163 at 3:55 p.m. in Sydney from yesterday, paring this week’s decline to 0.5 percent. It added 0.2 percent to 80.58 yen, after weakening 1.7 percent yesterday, the sharpest drop since May 30. New Zealand’s dollar gained 0.3 percent to 79.16 U.S. cents, having fallen 0.8 percent since July 6, and fetched 62.76 yen from 62.62.

The MSCI Asia Pacific Index of shares rallied 0.5 percent after falling as much as 0.2 percent.

The 7.6 percent growth in China’s economy compared with an 8.1 percent gain in the first quarter and the 7.7 percent median forecast of economists. Separate reports showed industrial production increased at a slower pace in June while retail sales growth decelerated.

China Policy

The People’s Bank of China on July 5 announced the second interest-rate cut in a month, adding to the first since 2008, to support growth. Premier Wen Jiabao pledged to intensify fine- tuning of policies as downward pressure on the economy remains “relatively large,” according to a July 8 report by the official Xinhua News Agency.

“We believe the second quarter to be the trough in Chinese economic activity and therefore we ultimately think the Australian dollar is likely to be in the process of finding a bottom in the not too distant future,” said Gavin Stacey, the Sydney-based chief rate strategist at Barclays Plc. “We’re hoping to start to see the effects of the policy initiatives to start to show up in the economic data.”

The yield on Australia’s benchmark 10-year bond added two basis points, or 0.02 percentage point, to 2.90 percent, after earlier touching 2.84 percent, the least since June 5. The one- year rate slid much as four basis points to an all-time low of 2.277 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 2.63 percent.

To contact the reporter on this story: Monami Yui in Tokyo at myui1@bloomberg.net

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


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