Aussie Gains on China Stimulus Speculation Before PMI

Australia’s dollar rose against most of its major peers amid speculation China’s government will initiate more stimulus to sustain growth, enhancing the export prospects for the South Pacific nation.

New Zealand’s dollar rose against the greenback, headed for a fourth weekly gain after the People’s Bank of China injected a net 365 billion yuan ($58 billion) into the financial system this week. China is Australia’s biggest trading partner and New Zealand’s second-largest export market. Demand for the currencies was also supported after Spain announced its fifth austerity package, reducing concern the indebted country may fail to meet requirements for a bailout.

“The figures coming out emphasize the need for China to look at their stimulus package and roll out more,” said Matthew Stanley, Sydney-based head of Asia-Pacific sales at Velocity Trade Ltd., a currency brokerage. “The news that has come out from Spain will probably support the currencies quite well,” he said referring to the Australian and New Zealand dollars.

Australia’s currency added 0.2 percent to $1.0458 as of 4:34 p.m. in Sydney after climbing 0.7 percent yesterday to $1.0442. The currency is poised for a 1.3 percent advance since August and a 2.2 percent gain this quarter.

New Zealand’s dollar advanced 0.3 percent to 83.41 U.S. cents from yesterday. The so-called kiwi is set to rise 3.8 percent his month and 4.1 percent since the end of June.

The yield on Australian 10-year government bonds dropped four basis points, or 0.04 percentage point, to 2.99 percent. The rate has fallen every day this week.

Chinese Stimulus

Fitch Ratings lowered its forecast for growth in China this year, citing a “deteriorating global growth outlook.” The credit rating company predicts China’s economy will expand 7.8 percent, compared with an earlier estimate of 8 percent.

China is scheduled to release its manufacturing purchasing managers index on Oct. 1, with economists surveyed by Bloomberg News predicting a reading of 50, the level that divides contraction from expansion. A similar private index from HSBC Holdings Plc and Markit Economics is due for release tomorrow. The data may increase pressure on Chinese Premier Wen Jiabao to try to boost growth ahead of the transfer of power to a new Communist Party leadership that begins later this year.

Investor appetite for risk also grew after Spanish Prime Minister Mariano Rajoy’s Cabinet yesterday approved a new tax on lottery winnings and a cut in ministries’ spending to shrink the euro area’s third-biggest budget deficit.

The New Zealand dollar advanced against 15 of its 16 major peers after home building approvals rose in August to a five- month high. Permits increased 1.9 percent from July when they gained a revised 2.2 percent, the country’s statistics office said in Wellington today. Consents rose to 1,406 -- the highest since March when a spending change in regulations prompted a jump in applications.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates was unchanged at 2.67 percent.

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

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