The Australian and New Zealand dollars headed for weekly declines against most of their major counterparts as concern the global economy is slowing damped demand for higher yields.
The so-called Aussie traded near a one-month low against the U.S. dollar after stocks declined worldwide. The Conference Board will announce a gauge of China’s economic outlook today after government data last week showed growth in the world’s second-biggest economy trailed economists’ estimates. Local government bonds rose, sending 10-year and 3-year yields to the lowest in more than four months.
Softer Chinese data “have contributed to the weakness in risk assets globally, including equities, commodity prices and Australian dollar,” said Greg Gibbs, a Singapore-based senior currency strategist at Royal Bank of Scotland Group Plc. “We’re still seeing strong evidence of high demand for high yield, which underpins the Aussie dollar and New Zealand dollar. I think they will remain quite stable at current levels.”
Australia’s dollar was little changed at $1.0292 as of 10:40 a.m. in Sydney from $1.0301 yesterday, when it touched $1.0269, the lowest since March 12. It was unchanged at 101.13 yen. For the week, the Aussie is set for a 2.1 percent drop against the U.S. dollar, the biggest since the five days ended May 4, and 2.1 percent loss versus the Japanese currency.
The New Zealand dollar bought 84.16 U.S. cents from 84.11 yesterday, poised for a 2 percent weekly decline. The currency rose 0.2 percent to 82.71 yen, down 2.1 percent since April 12.
The MSCI World Index of stocks slid 0.5 percent yesterday, while the Standard & Poor’s 500 Index (SPX) dropped 0.7 percent.
Three-year yields in Australia fell as much as four basis points, or 0.04 percentage point, to 2.67 percent, a level unseen since Dec. 31. Ten-year yields touched 3.17 percent, the lowest since Dec. 11.
Goldman Sachs Group Inc. cut China’s growth forecast to 7.8 percent this year from the previous estimate of 8.2 percent , according to an e-mailed research report. China is the biggest trading partner for both Australia and New Zealand.
In the U.S., the index of leading indicators fell 0.1 percent last month, the Conference Board said yesterday. The median estimate of economists surveyed by Bloomberg News was for a 0.1 percent rise. The New York-based group will announce the outlook gauge for China today.
Australia’s consumer prices probably rose 2.8 percent in the first quarter from a year earlier, according to the median estimate of economists in a Bloomberg poll before the Bureau of Statistics releases the data on April 24.
The Reserve Bank of Australia reiterated in the minutes released this week of its April 2 meeting that the inflation outlook gives it room to cut borrowing costs and the Australian dollar “remained high.”
“It looks like the CPI is going to stay at the lower half of the RBA’s band for the foreseeable future,” said RBS’s Gibbs. “The RBA said that there is scope to ease policy and data as expected shouldn’t really change that.”
Interest-rate swaps data compiled by Bloomberg show traders see a 41 percent chance the Reserve Bank of Australia will lower its benchmark to record 2.75 percent at the next meeting on May 7, compared with 36 percent probability indicated a week ago.
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