Aussie Dollar Remains Lower; Kiwi Touches a Month Low

Australia’s dollar remained lower following a decline at the end of last week before the central bank releases minutes tomorrow of its October meeting, at which it cut interest rates for the first time in four months.

The so-called Aussie was near a three-month low after Reserve Bank of Australia Governor Glenn Stevens said there is scope to further lower borrowing costs. New Zealand’s dollar, known as the kiwi, touched the weakest in a month after a private report showed the nation’s services industry contracted for the first time in almost three years.

“In the near term, I’m mildly bearish” on the Australian dollar, said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia (CBA), the nation’s biggest lender. “You do have an RBA governor that’s quite dovish.”

The Australian dollar traded at $1.0225 as of 4:57 p.m. in Sydney after dropping 0.3 percent to $1.0233 on Oct. 12. It touched $1.0149 on Oct. 8, the lowest since July 13. New Zealand’s currency slid to 81.30 U.S. cents, a level unseen since Sept. 11, before trading at 81.49, down 0.2 percent from the end of last week.

The RBA on Oct. 2 lowered its benchmark lending rate by a quarter of a percentage point to 3.25 percent, having cut it from 4.75 percent since embarking on a series of reductions last November.

Australia’s central bank has “ammunition,” Stevens said at an Oct. 12 seminar at the International Monetary Fund’s annual meeting in Tokyo. “Unusually for an advanced country, we actually have materially positive interest rates, so if needed, we have scope to move there as long as inflation is OK, which at present it seems to be.”

Australian Bonds

Australian bonds gained, with the benchmark 10-year yield falling one basis point to 3.02 percent. It reached 2.91 percent on Oct. 3, the least since July 27.

China’s imports from Australia dropped 18 percent in September from a year earlier, the Beijing-based customs administration said Oct. 13. Overall imports rose 2.4 percent.

“The underperformance of the Australian dollar can be explained by further colour around RBA Governor Stevens’ Friday comments and discouraging details in China’s trade data,” Michael Turner, a fixed-income and currency strategist in Sydney at Royal Bank of Canada, wrote in a research note today. The “minutes are likely to be suitably dovish.”

Net Longs

Futures traders cut their bets that the Australian dollar will strengthen against the U.S. currency, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Aussie compared with those on a drop -- so-called net longs -- slid 38 percent from a week earlier to 39,814 on Oct. 9, the biggest decline since June 5. It was at 89,562 on Sept. 25, the most since April 2011.

The Bank of New Zealand and Business New Zealand said today that their Performance of Services Index fell to 49.6 in September. It was the first time since October 2009 that the gauge was below 50, the dividing line between expansion and contraction.

Demand for the Aussie and kiwi was supported amid speculation China will introduce more steps to bolster economic growth as the Communist Party prepares for a once-a-decade leadership handover starting next month.

“Because of the change in China’s leadership, there are expectations for stimulus measures,” said Takuya Kawabata, a researcher at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency margin company. “Stimulus would be a positive for China’s economy as well as Australia, so it’s a positive for the Aussie too.”

The producer-price index in China dropped 3.6 percent last month from a year earlier, the steepest slide since October 2009, the country’s statistics bureau said today. Inflation eased to 1.9 percent in September, compared with the monthly average of 3.5 percent in the past year.

China is Australia’s largest trading partner and New Zealand’s second-biggest export destination.

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

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

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