BLBG: Aussie Falls From Two-Month High as Building Approvals Slump, Exports Drop
The Australian dollar fell from a two-month high against the U.S. currency after government reports showed home-building approvals slumped in January and exports declined.
The so-called Aussie weakened against all its 16 major counterparts as Barclays Capital forecast the extra yield offered by the nation’s bonds over U.S. Treasuries will shrink. New Zealand’s dollar traded near a four-month low versus the yen amid speculation the central bank will cut interest rates next week to help the economy recover from last month’s earthquake.
“The report on building approvals is weighing on the Aussie,” said Takashi Kudo, general manager in Tokyo of market information services at NTT SmartTrade Inc., a unit of Japan’s biggest phone company. “With the worsening fundamentals, a rate cut is more likely in New Zealand.”
Australia’s dollar declined to $1.0157 as of 4:35 p.m. in Sydney from $1.0169 yesterday in New York, after rising to $1.0202 on March 1, the strongest since Jan. 3. The currency slipped 0.1 percent to 83.13 yen. New Zealand’s dollar traded at 74.46 U.S. cents from 74.32 cents, and was at 60.95 yen from 60.84 yen yesterday, when it depreciated to 60.47, the lowest since Oct. 21.
The number of permits granted to build or renovate houses and apartments in Australia dropped 15.9 percent in January, the biggest decline since November 2002, the Bureau of Statistics said. A separate government report showed exports slid 4 percent, the most since July 2010.
Narrowing Spread
The extra yield investors demand to hold Australian 10-year bonds instead of similar-maturity U.S. Treasuries narrowed to 2.04 percentage points from as wide as 2.74 percentage points in November. A Chinese report today showed non-manufacturing industries contracted in February for the first time in a year.
“On the assumption that Australia’s economy is linked strongly to developments in Asia, there does appear to be justification for further Australia-U.S. 10-year spread narrowing,” Gavin Stacey, an interest-rate strategist at Barclays, wrote in a report today. “Further underperformance in emerging-market Asian equities versus U.S. equities” is likely.
The Reserve Bank of New Zealand will lower its benchmark rate by 13 basis points over the next 12 months, compared with a prediction for an increase of 57 basis points a month ago, according to a Credit Suisse Group AG index. A separate Credit Suisse index shows traders are 100 percent certain of a rate cut at the next RBNZ meeting on March 10.
A 6.3-magnitude earthquake struck the South Island city of Christchurch on Feb. 22, the city’s second major tremor in six months. The two quakes may have caused as much as NZ$20 billion ($14.9 billion) of damage, Prime Minister John Key has said.
U.S. Jobs
The decline in Australia’s dollar was tempered before a U.S. report that economists said will show employers added jobs for a fifth month in February, helping boost demand for higher- yielding assets.
U.S. employers hired 195,000 workers, up from 36,000 in January, according to a Bloomberg survey before the data is released tomorrow. A report from ADP Employer Services yesterday showed U.S. companies added more jobs than economists projected.
Economists are likely to “push up their forecasts for Friday’s payrolls increase” after the ADP data, John Kyriakopoulos, head of currency strategy in Sydney at National Australia Bank Ltd., wrote in a report today.
To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
