BLBG:Aussie Dollar Falls, Bonds Advance as Data Shows GDP Slowed; Kiwi Rallies
Australia’s dollar fell against 14 of its 16 major peers while bonds advanced after a report showed the country’s economy grew slower than economists estimated, opening the door to further central bank interest-rate cuts.
Yields on Australia’s 10- and three-year government debt fell to the lowest levels in almost three weeks after data showed gross domestic product increased 0.4 percent in the final quarter of 2011. Reserve Bank of Australia Deputy Governor Philip Lowe said the central bank has the flexibility to respond if currency strength hurts growth. New Zealand’s dollar rallied from a six-week low as technical indicators signaled the currency may rebound.
“The GDP report will keep rate-cut hopes alive and certainly adds to the overall tone this week of global growth concerns,” said Annette Beacher, head of Asia-Pacific research at TD Securities Inc. in Singapore. “I don’t see an immediate rebound in the Aussie dollar.”
Australia’s dollar declined to $1.0509, the lowest since Jan. 25, before trading at $1.0551 as of 5 p.m. in Sydney, little changed from yesterday’s close in New York. The Aussie fell 0.3 percent to 85.16 yen. It earlier touched 84.81, the lowest since Feb. 22.
New Zealand’s dollar rallied 0.5 percent to 81.65 U.S. cents from yesterday, when it slid to as low as 81.01, a level not seen since Jan. 25. The so-called kiwi added 0.3 percent to 65.91 yen from yesterday, when it touched 65.31, the least since Feb. 16.
Australian Unemployment
Australia’s fourth-quarter GDP was forecast to gain 0.8 percent, according to the median of 25 estimates in a Bloomberg News survey. The economy expanded a revised 0.8 percent in the previous quarter, which was weaker than previously reported, a Bureau of Statistics figures showed today.
Data tomorrow may show Australia’s unemployment rate rose to 5.2 percent in February from 5.1 percent in the previous month, according to a separate poll of economists.
Australia’s government bonds advanced, pushing the yield on the 10-year security down by as much as seven basis points, or 0.07 percentage point, to 3.94 percent, the lowest since Feb. 16. Yields (GACGB3) on the three-year government note touched 3.54 percent, also the lowest since Feb. 16.
“It is possible for exchange rates to overshoot,” the RBA’s Lowe said in the text of a speech today in Sydney. “Monetary policy would have the flexibility to respond provided the inflation outlook remained benign.”
The RBA yesterday left its overnight cash-rate target at 4.25 percent, in line with the forecast of all 25 economists surveyed by Bloomberg. Traders see about a 36 percent chance the central bank will cut borrowing costs by a quarter percentage point to 4 percent next month, Bloomberg calculations based on interbank cash-rate futures show, up from 30 percent yesterday after Stevens held.
Support Levels
New Zealand’s dollar may rise toward 82.43 U.S. cents, the Oct. 28 high, MacNeil Curry, the New-York based head of foreign- exchange and interest-rate technical strategy at Bank of America Merrill Lynch, wrote in a research note dated yesterday, citing the currency’s so-called key support levels at 80.86 and 80.90. Support is where buy orders may be clustered.
The kiwi earlier declined after Auckland-based Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said whole-milk powder prices fell to a five-month low.
The Thomson Reuters/Jefferies CRB Index (CRY) of raw materials fell 1.6 percent yesterday. The MSCI Asia Pacific Index (MXAP) of stocks fell 0.8 percent today after MSCI’s World Index (CRY) slid for a third day yesterday, dropping 2.1 percent.
“The Australian dollar had been the pin-up boy for risk- on, and now that we think we’re in a period of risk-off, the Australian dollar is clearly vulnerable,” said Gavin Stacey, chief interest-rate strategist at Barclays Capital Inc. in Sydney. “At the moment, commodities are coming off, so further weakness there would certainly fuel further weakness in the currency.”
-- Editors: Naoto Hosoda, Rocky Swift
To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
