BLBG: Australian Dollar Advances as Bank Lending Increases, Equities Pare Losses
The Australian dollar rose, paring its biggest quarterly drop since 2008, as regional equities trimmed losses on speculation a slump in higher-yielding assets may have been overdone.
The Aussie rallied today as Australian stocks partially retraced declines of as much as 2.2 percent. New Zealand’s currency traded near an almost three-week low versus the yen, headed for its second-straight quarterly loss, before a July 2 Labor Department report forecast to show the U.S. lost jobs for the first time this year.
“The tentative push higher in the Aussie has coincided with some regional markets bouncing off their session lows,” said Tim Waterer, a foreign exchange dealer with CMC Markets in Sydney. “There’s still an underlying panic in the market and the path of least resistance on any disappointing news is to the downside.”
Australia’s currency rose 0.3 percent to 85.15 U.S. cents as of 3:08 p.m. in Sydney from 84.87 cents in New York yesterday, set for a 7.2 percent loss since March 31. It earlier touched 84.65 cents, its weakest since June 11. The currency was at 75.39 yen after yesterday reaching 74.93 yen, the least since June 9.
New Zealand’s dollar fetched 69.27 U.S. cents from 69.20, headed for a 2.5 percent drop this quarter. It traded at 61.35 yen from 61.31 yesterday, when it slid to as low as 61.02, the weakest since June 10. The kiwi has lost 7.6 percent against the yen over the past three months.
The Aussie’s sell-off yesterday, when it dropped by the most since May 20 against the dollar, was “a little overdone,” Waterer said. The currency may gain toward 85.50 cents, he said.
Demand for the Australian dollar was also bolstered as bank lending rose in May for a sixth month and house prices gained.
Bollard’s Comments
Loans provided by financial companies advanced 0.5 percent in May, more than the median forecast of economists in a Bloomberg News survey. Dwelling prices across Australia’s largest cities rose a seasonally adjusted 0.5 percent in May, according to an RP Data-Rismark index released today.
New Zealand’s currency was supported after central bank Governor Alan Bollard said policy makers will keep unwinding monetary policy stimulus as the economy recovers.
New Zealand has emerged from its recession, benefiting from stronger growth in its major trading partners, Bollard said in a statement today when releasing the annual Statement of Intent. Recovery remains sluggish in the U.K. and Europe, and sovereign debt concerns hovering over several European economies are disturbing financial markets, he said.
Benchmark interest rates are 4.5 percent in Australia and 2.75 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
U.S. Payrolls
Both South Pacific nations’ currencies are headed for quarterly losses before reports tomorrow that economists said will show manufacturing growth in China and the U.S. slowed for a second month. Year-to-date, the Aussie has weakened 5.1 percent against the greenback and the kiwi has lost 4.1 percent.
U.S. payrolls fell by 115,000 in June, the Labor Department is forecast to say, according to a Bloomberg News survey. The Institute for Supply Management’s manufacturing gauge declined to 59.0 from 59.7 in May, another poll forecasts.
China Manufacturing
China’s Purchasing Managers’ Index dropped to 53.2 in June from 53.9 in May, according to a separate survey.
“With payrolls looming we’re probably in for some nervousness with the likes of the Aussie a little lower,” said Sean Callow, a currency strategist at Westpac Banking Corp. in Sydney. “That could make or break sentiment.”
The Aussie may decline toward 84.25 U.S. cents today, Callow said. Westpac recommended on June 28 that investors sell the currency, looking for a drop to 84 cents, on signs of an economic slowdown in China. Investors should lock in a profit if the Aussie climbs to 86.19 cents, the bank said today.
Australian bond futures rose for a seventh day, with the 10-year contract for September delivery at 94.88 on the Sydney Futures Exchange from 94.85 yesterday. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.09 percent from 4.10 yesterday.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
