BLBG: Australian Dollar Declines on Speculation Gains Were Too Rapid
The Australian dollar declined as investors speculated the currency’s record 20 percent gain against the greenback over the past three months was too rapid.
The New Zealand dollar halted a six-day advance after a government report showed New Zealand’s exports fell 4.6 percent in April from a year earlier, led by a decline in crude oil and aluminum shipments. Australia’s currency approached an eight- month high on May 22.
“The Aussie is teetering on the topside of a trend and looks like it needs a pull-back,” said Charles Wiggins, corporate risk manager at Custom House Global Foreign Exchange in Sydney. “The Australian dollar will find support around 77.60 cents.”
Australia’s currency fell 0.7 percent to 77.68 U.S. cents at 12:04 p.m. in Sydney from 78.21 cents yesterday and bought 73.59 yen from 74.17 yen. New Zealand’s dollar declined 0.5 percent to 61.73 U.S. cents from 62.07 cents yesterday. It bought 58.49 yen from 58.86.
Volumes in currency markets were thin yesterday because of holidays in the U.S. and U.K., Wiggins said. New Zealand’s dollar will find buyers at 61.50 cents today, he said.
Analyst Forecasts
The Australian dollar’s strongest ever three-month rally has pushed currency analysts to raise forecasts for the so- called Aussie faster than any other major currency.
The median year-end Aussie forecast in monthly Bloomberg surveys rose 14 percent this year to 75 cents, the biggest increase among the 16 most-traded currencies against the U.S. dollar, and is now about 3 cents shy of the current price. Strategists at BNP Paribas SA, Wells Fargo & Co. and 21 other companies raised estimates in May on speculation China’s demand for Australian exports, from iron ore to wool, will rebound.
“As long as we have domestic demand in Asia being built up over the coming quarters, the Aussie has the potential to do well,” said Sharada Selvanathan, a currency strategist at BNP Paribas in Hong Kong in a Bloomberg TV interview. “Decent pullbacks in the Australian dollar provide a good opportunity to form some medium- to long-term long positions.” Long positions are bets that a currency will rise.
The New Zealand dollar may drop before the nation releases its budget on May 28. Standard & Poor’s put a negative outlook on New Zealand’s AA+ foreign currency credit-rating in January, saying it wanted to see evidence of an improving fiscal position.
Budget, Bonds
“The budget may still unnerve the ratings agencies,” David Watt, a senior currency strategist in Toronto at RBC Capital Markets, wrote in a report. “The New Zealand dollar remains closely tied to 62 cents, but seems poised to extend the rally toward 63 cents.”
Australian government bonds advanced for the first day in six. The yield on 10-year notes fell four basis point, or 0.04 percentage point, to 5.23 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 gained 0.29, or A$2.90 per A$1,000 face amount, to 100.14.
The Australian state of New South Wales today said it will sell A$500 million ($391 million) of four-year notes paying 5.25 percent, establishing a new benchmark bond.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.55 percent from 3.57 yesterday.
