BLBG:Dollar Rises on China Slowdown Concern, Asian Stock Loss
The dollar rose against most major peers after BHP Billiton Ltd. (BHP), the world’s largest mining company, said China’s steel production is slowing, damping demand for currencies linked to Asian growth.
Australia’s dollar weakened as Rio Tinto Group also signaled that China’s near-term growth is waning, raising concern that commodity prices will fall. New Zealand’s currency slid for the first time in four days as Asian stocks were poised for their biggest drop in more than a week. The dollar was still 0.2 percent from a one-week low against the euro on speculation Federal Reserve Chairman Ben Bernanke will repeat that a slow U.S. recovery warrants near-zero interest rates.
“Comments from BHP and Rio Tinto talking about a slowdown in China are hurting commodity currencies led by the Australian dollar,” said Tim Kelleher, Auckland-based head of institutional foreign-exchange sales at ASB Institutional, a unit of Commonwealth Bank of Australia. (CBA) “The U.S. dollar and yen are rallying.”
The dollar rose 0.2 percent to $1.0583 per Australian dollar as of 6:32 a.m. in London and gained 0.3 percent to 82.40 cents versus New Zealand’s currency. The greenback fetched 83.42 yen from 83.35. It traded at $1.3237 per euro from $1.3238 yesterday, when it fell as low as $1.3266, the least since March 9. The euro traded at 110.43 yen from 110.34 yesterday when it rose as high as 110.57, the strongest since Oct. 31.
China’s Outlook
“The big infrastructure build clearly will come to some end,” Ian Ashby, Melbourne-based BHP’s president of iron ore, told reporters today in Perth. “Steel growth rates will flatten, and they have flattened.”
BHP, whose biggest customer is China, is re-evaluating spending plans amid slowing Chinese growth, the Australian Financial Review reported today, citing comments by Chairman Jacques Nasser to investors.
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.
“There will be further risk that the Chinese economy will be slowing down” in a stronger deceleration 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.”
Asian Stocks
Asian currencies including Malaysia’s ringgit and Thailand’s baht declined as the MSCI Asia Pacific excluding Japan index of stocks fell 0.4 percent. Shares fell before interest-rate reviews this week at which Thailand and Taiwan are expected to keep borrowing costs unchanged as costlier oil heightens inflation risks.
“When stocks are down, it’s hard to buy Asian currencies,” said Kozo Hasegawa, a trader at Sumitomo Mitsui Banking Corp. in Bangkok. “The market is also waiting for an outcome from the central bank policy reviews, keeping currencies in a tight range.”
The ringgit dropped 0.2 percent to 3.0595 per dollar, the baht fell 0.1 percent to 30.75 and South Korea’s won weakened 0.2 percent to 1,124.90.
Bernanke Speaks
Gains in the dollar versus the euro were limited before Bernanke gives the first of four lectures at George Washington University today and testifies before a U.S. House committee about Europe’s debt crisis on March 21.
Bernanke said March 14 that a “frustratingly slow” recovery in the world’s largest economy was impeding efforts by banks to make profitable loans. Policy makers said the previous day that “elevated” unemployment and a subdued outlook for inflation warranted keeping borrowing costs “exceptionally low” at least through late 2014.
“The Fed is not going to change their recent rhetoric on the economy and they’re going to still characterize the recovery as somewhat tepid,” said Andrew Salter, a strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Sydney. “The long-term trend that’s in place is U.S. dollar weakness.”
The dollar has declined 0.5 percent in the past week, the third-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has gained 0.8 percent and the yen declined 1.2 percent.
Liquidity in currency markets will be thin today due to a public holiday in Japan, UBS AG said in a research note.
Demand for the 17-nation euro may be bolstered before March 22 data from London-based Markit Economics that’s predicted to show manufacturing and services growth accelerated in Germany. A measure of factory output probably climbed to 51 this month from 50.2 in February while a gauge of services rose to 53.1 from 52.8, according to the median estimates in Bloomberg News surveys of economists.
ANZ Bank’s Salter predicts the euro will climb to $1.35 by June and $1.37 by September. The currency will trade at $1.29 and $1.30, respectively, according to median forecasts in Bloomberg analyst surveys.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net
