Australia’s dollar rose toward a three-week high, snapping a two-day loss, after a government report showed the nation’s economy contracted by less in the first quarter than some analysts forecast. The so-called Aussie gained against all of its major counterparts after the report showed first-quarter gross domestic product shrank 1.2 percent from the previous three months, close to the median estimate for a 1.1 percent drop of economists surveyed by Bloomberg News. The New Zealand dollar fell as a technical indicator signaled its recent rally to a record high was overdone. “The market did see a worse result, and the Aussie dollar has underperformed other commodity currencies leading into the data,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “So this may deviate some of the underperformance and catch up a little.” Australia’s dollar rose to $1.0744 as of 3:52 p.m. in Sydney from $1.0672 yesterday in New York, when it reached $1.0758, the highest since May 11. The currency gained 0.4 percent to 87.35 yen. New Zealand’s dollar fell to 82.16 U.S. cents from 82.39 cents yesterday, when it reached 82.64, the strongest since the currency was freely floated in 1985. It weakened 0.5 percent to 66.82 yen. Australia’s GDP fell 1.2 percent from the fourth quarter, when it rose a revised 0.8 percent, the Bureau of Statistics report released in Sydney today showed. That was above a 2 percent contraction forecast by David Colosimo a Melbourne-based economist at Goldman Sachs Group Inc. Australia GDP “The outcome wasn’t as bad as some of the worst expectations,” said John Rothfield, an economist at Bank of America Merrill Lynch in Sydney. “The high currency has done some of the work for the central bank but not enough to tip it back to a neutral bias.” The Reserve Bank of Australia, which kept its key interest rate unchanged at 4.75 percent for the past five meetings, will meet on June 7. Swap traders are betting the central bank will boost its benchmark rate by 24 basis points over the next 12 months, a Credit Suisse index showed, compared with a prediction for 16 basis points of increases yesterday. The Aussie also gained after data showed China’s manufacturing expanded in May at a faster pace than economists forecast. The Asian nation is Australia’s largest trading partner. The Purchasing Managers’ Index was at 52 from 52.9 in April, the China Federation of Logistics and Purchasing said in an e-mailed statement. The number was higher than the median forecast of 51.6 in a Bloomberg News survey of 16 economists. The New Zealand dollar’s 14-day relative strength index versus the greenback was at 66.1, approaching the 70 threshold that some traders see as a sign an asset’s price has risen too far and is poised to drop. To contact the reporter on this story: Monami Yui in Tokyo at myui1@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

Source