Aussie Set for Biggest Monthly Loss Since ’11 on Economy Concern

Australia’s dollar headed for its biggest monthly decline in more than two years on speculation a slowdown in China will weigh on the economy, prompting the Reserve Bank to cut interest rates this year.

The Aussie has slumped 5.2 percent over the past month, the among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The International Monetary Fund this week lowered its growth forecasts for China, Australia’s biggest trading partner. Dearborn, Michigan-based Ford Motor Co. cited foreign-exchange levels when it announced this month that it would stop making cars in Australia.

“We have a short position in Australian dollars,” said Park Sungjin, the head of asset management in Seoul at Meritz Securities Co., which oversees $7 billion. “The reason is their weak economy,” Park said, citing Ford’s decision. The Aussie will fall to 90 U.S. cents by year-end, he said.

Australia’s dollar dropped 0.2 percent to 96.47 U.S. cents as of 4:27 p.m. in Sydney. The Aussie fell 0.3 percent to NZ$1.1929 and gained 0.1 percent to 96.41 yen.

New Zealand’s dollar rose 0.1 percent to 80.84 U.S. cents and added 0.4 percent to 81.67 yen.

For the month, the Aussie is set for a 7 percent slide versus the greenback, the most since a 9.8 percent plunge in September 2011. The kiwi is poised for a 5.5 percent decline in May.

Australian Economy

In Australia, gross domestic product probably rose an annualized 2.7 percent in the three months ended March 31, the slowest in more than a year and down from the 3.1 percent expansion in the fourth quarter, according to the median estimate of economists surveyed by Bloomberg News before the data on June 5.

The IMF on May 29 lowered growth forecasts for China, Australia’s biggest trading partner to 7.75 percent this year and next from earlier projections of 8 percent for 2013 and 8.2 percent in 2014. Investment in commodities and energy has peaked, threatening to slow Australia’s economy, the government said this month.

Australia’s 10-year government note yield slid four basis points, or 0.04 percentage point, to 3.36 percent. The three-year rate fell two basis points to 2.60 percent.

Demand for the kiwi was supported after data showed the nation’s terms of trade rose more than economists estimated.

The terms of trade index, which measures the price of exports relative to imports, rose 4.1 percent in the first quarter from the previous three-month period, when it fell a revised 1.2 percent, Statistics New Zealand said in a statement in Wellington today. Economists had expected a 1.5 percent increase.

Fed Bets

Losses in the South Pacific nations’ currencies were limited before U.S. data that may add to the case for the Federal Reserve to maintain stimulus.

U.S. consumer spending was probably unchanged in April from the previous month, according to the median estimate of economists surveyed by Bloomberg before the data today. Personal income rose 0.1 percent last month, compared with an 0.2 percent in March, economists predicted.

Fed Chairman Ben S. Bernanke said last week that the central bank may slow quantitative easing if officials see indications of sustained improvement in economic growth. Reports yesterday showed first-quarter gross domestic product was revised down to a 2.4 percent annualized rate from 2.5 percent reported last month and an increase in jobless claims.

“I don’t think the Fed is going to taper any time soon,” said Derek Mumford, a director at Rochford Capital, a currency risk-management company in Sydney. “The U.S. dollar strength is not entirely justified. The Aussie is still struggling to get to 97 cents, but if it does break above it, there will be stop-losses which could see it spike up to 97.80.”

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Mio Coxon in Tokyo at mcoxon1@bloomberg.net

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.