Bloomberg News

Aussie Dollar Halts Drop as Data Shows Factory Growth in China

November 22, 2012

The Australian dollar snapped a two- day decline after a private report showed China’s manufacturing expanded for the first time in 13 months.

The so-called Aussie and the New Zealand dollar touched seven-month highs versus the yen after Asian stocks climbed, boosting the allure of higher-yielding assets. Demand for the South Pacific currencies was limited before purchasing managers indexes that economists say will indicate the euro area’s services and manufacturing industries shrank for a 10th month.

“Today’s report underscores the halting of China’s slowdown,” said Teppei Ino, an analyst at Bank of Tokyo- Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group by market value. “While we have to see further signs of improvement, it’s positive for the Australian dollar.”

The Aussie rose 0.2 percent to $1.0387 as of 5:14 p.m. in Sydney after falling 0.4 percent over the previous two days. The New Zealand dollar, nicknamed the kiwi, added 0.1 percent to 81.55 U.S. cents following a two-day, 0.7 percent slide.

The Australian currency reached 85.791 yen, the strongest since April 2, before trading at 85.64 from 85.55 yesterday. The kiwi was little changed at 67.25 yen after climbing to 67.38, a level unseen since April 13.

The MSCI Asia Pacific Index (MXAP) of shares rose 0.9 percent. U.S. financial markets are shut today for the Thanksgiving holiday.

Australia’s bonds fell, with the benchmark 10-year yield rising as much as eight basis points, or 0.08 percentage point, to 3.27 percent, the highest since Oct. 26.

HSBC Holdings Plc and Markit Economics said today that their purchasing managers’ index for Chinese manufacturing was at 50.4 in November on a preliminary reading, compared with a final level of 49.5 in October. A reading above 50 indicates expansion.

‘Nice Result’

“The bottom seems to be in for the Chinese manufacturing sector, if we are to take the indications from the PMIs and other incidental data,” Sacha Tihanyi, a Hong Kong-based senior currency strategist at Scotiabank, wrote in an e-mailed note today. “The flash PMI provides a nice result that should help Asian sentiment into the end of the week.”

The Australian dollar weakened 1.7 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-market currencies. The kiwi slipped 0.3 percent.

Markit Economics is predicted to say today that its composite index for euro-area services and manufacturing was unchanged at 45.7 in November, based on the median estimate of economists surveyed by Bloomberg News.

“We haven’t really seen any stabilization as far as the euro-zone economies go,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “The PMI data will feed through to risk appetite and investor confidence, which is important” for currencies such as the Australian and New Zealand dollars, he said.

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net

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


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