Bloomberg News

Aussie Trades Near Two-Week High as China Factory Data Improves

November 01, 2012

Australia’s dollar traded near its strongest level in two weeks after an improvement in manufacturing gauges in China, the South Pacific nation’s biggest trading partner.

The so-called Aussie rose for a third day against the yen ahead of next week’s policy decision by the Reserve Bank of Australia. Demand for the Australian and New Zealand dollars was limited as investors awaited the last jobs report in the U.S. before the presidential election.

“We’ve been seeing a pickup in the Chinese economy,” said Takuya Kawabata, an analyst at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency margin company. “The improved sentiment about China can create upward pressure for the Aussie.”

The Australian dollar bought $1.037 as of 3:51 p.m. in Sydney, little changed from the close yesterday when it touched $1.04, the highest since Oct. 18. It added 0.3 percent to 83.02 yen, after earlier reaching 83.18, the strongest since Oct. 26. The New Zealand dollar fetched 82.20 U.S. cents from 82.25 and traded at 65.80 yen, up 0.3 percent.

Australian bonds were little changed, with the yield on the 10-year note at 3.13 percent.

China Manufacturing

An official gauge of Chinese manufacturing based on a survey of purchasing managers climbed to 50.2 in October from 49.8 in September. It was the first time since July that the gauge has been above the 50 level that separates expansion from contraction.

A similar measure published by HSBC Holdings Plc and Markit Economics rose to 49.5 in October from 47.9 the prior month, a separate report showed.

The Shanghai Composite Index of stocks rose 1.8 percent. China is Australia’s largest trading partner and New Zealand’s second-biggest export market.

Overnight index swaps data compiled by Bloomberg indicate about a 56 percent chance that the RBA will lower its key rate to 3 percent from 3.25 percent at its Nov. 6 meeting. That compares with a 95 percent probability seen on Oct. 23, the day before data showed a faster-than-expected gain in Australia’s consumer prices.

RBA Outlook

“Two reasons we believe the RBA should pause is that both Chinese activity and local inflation pressures are firmer than expected,” said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore. “The RBA can afford to pause at 3.25 percent and ‘wait and see’ for the next round of monthly data, as well as assess the impact to date of previous easing.”

The Australian Industry Group and PricewaterhouseCoopers said today their manufacturing index was at 45.2 last month compared with 44.1 in September. The index has held below 50, indicating a contraction, for eight consecutive months.

The U.S. Labor Department will issue its monthly report on employment tomorrow as scheduled after the Atlantic storm Sandy closed government offices for two days this week, a spokesman said yesterday. The jobs report may help sway voters trying to decide between giving President Barack Obama another four years in office or to change course with Republican challenger Mitt Romney.

Nonfarm payrolls may have increased by 125,000 workers in October and the jobless rate probably rose to 7.9 percent, according to the median projections of economists surveyed by Bloomberg.

“By and large we are still in range trading” ahead of the U.S. jobs report, said TD’s Beacher. “No one is really putting any risk on the table.”

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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