BLBG:Aussie Falls on Concern China Commodity Demand Slowing
Australia’s dollar dropped for the first time in four days on speculation China’s economic growth will slow, damping demand for the South Pacific nation’s exports.
The so-called Aussie weakened versus the yen after reaching a 10-month high yesterday as Melbourne-based BHP Billiton Ltd. (BHP), the world’s largest mining company, said steel production is slowing in China, Australia’s biggest trading partner. Australia’s dollar pared earlier gains that followed the publication of central bank minutes showing officials saw less downside risk to the economy at this month’s meeting. New Zealand’s currency slid as Asian stocks declined.
“There will be further risk that the Chinese economy will be slowing down” more than expected, said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “The Aussie is still a sell on rallies at the moment.”
Australia’s dollar lost 0.4 percent to $1.0567 at 4:50 p.m. in Sydney after earlier climbing as much as 0.2 percent. The Aussie slid 0.3 percent to 88.18 yen from 88.40 yesterday, when it rose as high as 88.64, the highest since May 2011. New Zealand’s currency fell 0.3 percent to 82.38 U.S. cents and slid 0.2 percent to 68.73 yen.
The MSCI Asia Pacific Excluding Japan Index (MXAPJ) of stocks dropped 0.6 percent. Japanese markets are closed for a public holiday.
Flattening Steel Growth
“The big infrastructure build clearly will come to some end,” BHP’s Ian Ashby, president of iron ore, told reporters today in Perth. “Steel growth rates will flatten, and they have flattened, and we still see positive growth out to the middle of the next decade.”
Chinese Premier Wen Jiabao this month announced an economic growth target of 7.5 percent for this year, down from an annual 8 percent over the past seven years. Steel output growth in China, the biggest producer, may slow to 4 percent this year, the China Iron and Steel Association said March 6.
Australia’s dollar has climbed 1.4 percent this year, the third-best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. New Zealand’s currency was the biggest gainer, having advanced 4.1 percent over the same period.
Reserve Bank of Australia policy makers noted that while downside risks “could still materialize, this seemed somewhat less likely than a few months ago,” according to the minutes of their March 6 meeting released today. “So long as inflation remained well contained, there would be ample scope for the bank to ease policy in such a scenario.”
Governor Glenn Stevens held the overnight cash rate at 4.25 percent for a second meeting this month.
Rates on Hold
“The minutes are relatively supportive of the Aussie,” said Thomas Harr, head of Asian currency strategy at Standard Chartered Plc in Singapore. The RBA “has been pretty consistent in their message recently that basically rates are on hold.”
Traders pared bets that the central bank will cut rates at its next meeting, with a Credit Suisse Group AG index based on swaps indicating a 20 percent chance of a quarter-point reduction, compared with a 31 percent probability a week ago.
Australian government bonds held a decline from yesterday, with the yield on 10-year (GACGB10) securities little changed at 4.27 percent. The yield rose above the RBA’s main rate on March 15 for the first time since August.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, dropped six basis points to 3.12 percent.
To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
