BLBG:Aussie Dollar Falls After Trade-Deficit Data; Kiwi Drops
Australia’s dollar was 0.8 percent from this year’s low after the nation reported a larger-than- estimated trade deficit amid concern spending cuts by the government will damp economic growth.
The so-called Aussie snapped a gain from yesterday before Treasurer Wayne Swan announces the budget for the year starting July 1 later today. New Zealand’s dollar fell in its longest losing streak in more than six years as Greek political leaders meet in a bid to form a new government, after an election raised questions about the country’s membership in the euro bloc.
“Factors that supported the Australian dollar are peeling away,” said Yoshisada Ishide, who manages the world’s biggest mutual fund focusing on Australian dollar-denominated bonds at Daiwa SB Investments Ltd. in Tokyo. “Markets understand that Australia’s government can’t take stimulus measures and that it has to rely on monetary policy” to support growth.
The Aussie slid as much as 0.3 percent before trading at $1.0190 at 4:03 p.m. in Sydney, little changed from the New York close. It touched $1.0110 yesterday, the lowest since Dec. 29. The New Zealand dollar fell for a seventh day, the longest stretch of declines since November 2005, and dropped 0.1 percent to 79.36 U.S. cents.
Australia’s imports outpaced exports by A$1.587 billion ($1.61 billion) in March, the Bureau of Statistics said in Sydney today. The median estimate in a Bloomberg News survey of economists was for a deficit of A$1.3 billion.
Budget Surplus
The budget details will be announced at about 7:30 p.m. in Canberra. The governing Labor party, which trailed the opposition by 18 percentage points in the latest opinion poll, says a return to surplus will give the central bank room to lower borrowing costs in a nation where almost 90 percent of mortgages have variable rates.
“The budget is expected to be contractionary for economic growth,” said Emma Lawson, a currency strategist in Sydney at National Australia Bank Ltd. (NAB) “Over time, that may make it harder for Aussie to regain a move to the upside.”
The yield on Australia’s 10-year debt was at 3.43 percent today after sliding to a record 3.39 percent yesterday. Yields had dropped after the Reserve Bank of Australia cut interest rates by 50 basis points to 3.75 percent on May 1.
“Rates have been falling more rapidly than markets expected,” said Ishide, who manages the equivalent of $14.8 billion. “Rates can’t be a supporting factor for the Aussie.”
Greek Politics
In Greece, New Democracy leader Antonis Samaras said he failed to forge agreement to form a government after weekend elections. The attempt will now pass to Alexis Tsipras, the head of Syriza, the second-biggest party, which has vowed to cancel bailout terms for the nation. Tsipras will see President Karolos Papoulias today at 2 p.m. Athens time.
New Zealand’s two-year swap rate, which exchanges a fixed rate for a floating one or vice versa, rose two basis points to 2.49 percent. It slid to 2.46 percent yesterday, the least on record going back to 1993.
The country’s budget deficit was wider than forecast in the nine months through March as tax revenue slowed, a report from the Treasury Department showed today. Export prices for the nation’s commodities dropped 4.5 percent in April month-on- month, the most in more than three years, an index compiled by ANZ National Bank Ltd. showed last week.
“The New Zealand dollar has finally succumbed to some of the weaker fundamentals that have been present in the economy,” said Khoon Goh, a senior foreign-exchange strategist in Singapore at Australia & New Zealand Banking Group Ltd. (ANZ) “Weaker global sentiment, particularly over the beginning of this week, finally saw the kiwi playing catch-up to the fundamentals.”
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.
