Australia's Dollar Near 10-Week Low as GDP Growth Slows More Than Forecast

Australia’s dollar traded near a 10- week low versus the greenback after a government report showed the economy grew at half the pace that analysts forecast in the third quarter.

The so-called Aussie weakened for a second day versus the yen as the report tempered speculation the Reserve Bank of Australia will raise interest rates to cool inflation. The New Zealand dollar was near a two-month low against the U.S. currency as concern Europe’s debt crisis will spread damped demand for higher-yielding assets.

“It’s fair for the Aussie to sell off on the data,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp., Australia’s second-largest lender. “It was a bit of a disappointing quarter and the risks of the timing of the next RBA hike are being pushed even further out.”

Australia’s dollar traded at 95.91 U.S. cents as of 5:21 p.m. in Sydney from 95.88 cents in New York yesterday, after falling to 95.37 cents, the weakest since Sept. 24. The currency dropped 0.2 percent to 80.06 yen.

New Zealand’s dollar was at 74.44 U.S. cents from 74.26 cents yesterday, when it declined to 73.98, the lowest since Oct. 5. The so-called kiwi bought 62.13 yen from 62.14 yen.

The Australian currency weakened versus all except two of its 16 major counterparts after the Bureau of Statistics said gross domestic product expanded 0.2 percent last quarter from the previous three months. Economists forecast a 0.4 percent gain, according to a Bloomberg News survey.

Manufacturing Shrinks

A separate report showed manufacturing contracted in November for a third month. The performance of manufacturing index fell to 47.6 from 49.4 in October, the Australian Industry Group and PricewaterhouseCoopers said in a survey released today. A number below 50 indicates contraction.

The RBA will raise its target rate by 17 basis points over the next 12 months, a Credit Suisse Group AG index showed, down from 22 basis points of tightening indicated yesterday.

Demand for Australia’s currency was also damped as signs China’s economy is accelerating fueled speculation the nation’s central bank will take more steps to slow down.

China Purchasing Managers’ Index rose to 55.2 in November, from 54.7 the prior month, a report from the nation’s logistics federation showed today. A stronger reading may give the government more reason to to tighten policy, Lu Zhengwei, an economist at Industrial Bank Co., said before the release.

‘Crimp Growth’

“The Aussie is also suffering from concerns that the outbreak of inflation in China and monetary-policy actions that the Chinese may have to take could crimp growth going forward,” Ray Attrill, head of macro strategy in Sydney at Tallship Investments, said in a Bloomberg Television interview. “On a three-month view, I recast my forecast last night and I got the Aussie to coming down to about 90.”

Standard & Poor’s said yesterday it may cut Portugal’s credit ratings on concern the government has made little progress on boosting economic growth to offset the fiscal drag from scheduled 2011 budgetary cuts.

Australian bonds gained for a fourth day. The yield on the benchmark 10-year note dropped six basis points to 5.35 percent, according to data compiled by Bloomberg. The 4.5 percent security due April 2020 rose 0.43, or A$4.30 per A$1,000 face amount, to 93.82.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell one basis point to 3.85 percent.

To contact the reporter on this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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