Bloomberg News

Australian Dollar Near One-Month Low Amid Growth Concerns

August 29, 2012

Australia’s dollar traded 0.3 percent from a one-month low amid concern slowing global growth is weighing on the country’s economy.

The so-called Aussie remained lower versus the yen following a five-day slide before data this week that analysts predict will show a drop in building approvals. A report today showed construction work completed fell in the second quarter. The Australian and New Zealand dollars were supported after European Union President Herman Van Rompuy said yesterday the region’s rescue fund is ready to aid Spanish banks, increasing demand for higher-yielding assets.

“Downward pressure on the Aussie can probably continue today,” said Peter Dragicevich, a currency economist in Sydney at Commonwealth Bank of Australia. (CBA) “If the domestic numbers are weaker than expected that would weigh on the Aussie.”

Australia’s dollar was at $1.0378 as of 4:33 p.m. in Sydney from $1.0377 yesterday, when it reached $1.0345, the lowest since July 26. It was little changed at 81.50 yen, after falling 2 percent over the past five days.

New Zealand’s dollar, known as the kiwi, traded at 80.53 U.S. cents from 80.46. It touched 80.34 yesterday, the weakest since July 27. The currency fetched 63.25 yen from 63.17.

Building Permits

Australian building approvals probably dropped 5 percent in July from a month earlier after falling 2.5 percent in June, according to economists surveyed by Bloomberg News. A separate report may show business investment growth slowed to 3 percent in the second quarter, following a 6.1 percent increase in the first three months of the year.

Data published today by the statistics bureau showed construction work completed fell 0.2 percent in the three months through June, compared with a revised 7.8 percent increase in the first quarter.

A purchasing managers’ index of manufacturing activity in China, Australia’s biggest trading partner, probably fell to 50 in August from 50.1 the previous month, according to the median estimate of economists surveyed by Bloomberg before the data are published on Sept. 1. The 50 level is the dividing line between expansion and contraction.

Renewed China concern has also reduced the attractiveness of the Aussie dollar given the increasing dependency of Australia on the world’s second-largest economy, Mitul Kotecha, head of global foreign-exchange strategy at Credit Agricole CIB in Hong Kong, wrote in a note to clients today. The currency is “vulnerable to higher risk aversion,” he wrote.

Monthly Performance

The Australian currency has fallen 2.5 percent in the past month, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The New Zealand dollar weakened 2 percent over the same period, the second-biggest loser.

Australia’s government bonds were little changed, with the yield on the 10-year security at 3.19 percent. The rate touched 3.17 percent yesterday, the lowest since Aug. 3.

The South Pacific currencies were supported amid speculation the European Central Bank may be preparing a bond- buying program. ECB President Mario Draghi canceled his trip this week to the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, to prepare for the central bank’s next meeting in Frankfurt on Sept. 6.

“Market reaction seems to suggest that people think Draghi is preparing for next week’s ECB meeting and he’s looking to announce something major,” Commonwealth Bank’s Dragicevich said.

Van Rompuy damped speculation that Spain will need a full rescue at a joint news conference with Spanish Prime Minister Mariano Rajoy in Madrid yesterday.

“Spain already has a large program to restructure its financial sector, which deals with the most acute economic challenge,” he said. Spain could tap other types of aid “if financial markets’ defiance persists.”

To contact the reporters on this story: Sharon Chen in Singapore at schen462@bloomberg.net Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net;

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net


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