Aussie Reaches One-Week High on Bets Drop Overdone

Australia’s dollar touched its highest level in a week amid speculation its recent decline has been excessive.

The Aussie recovered from an earlier loss that had been fueled by concern that trade is slowing with China, its biggest export destination. The currency touched a three-year low on July 3 as traders’ bets on a drop reached a record. New Zealand’s kiwi dollar was supported after the finance minister said it’s certain the nation’s interest rates will rise.

“Everybody who’s got a bearish view on Aussie dollar has already put their money where their mouth is,” said Ray Attrill, the Sydney-based global co-head of currency strategy at NAB. “Positioning looks to be extreme.”

The Australian currency rose 0.3 percent to 91.98 U.S. cents as of 4:42 p.m. in Sydney from yesterday, and touched 92.18, the most since July 2. The kiwi advanced 0.1 percent to 78.62 U.S. cents, after falling as much as 0.3 percent and rising 0.4 percent.

The Aussie has tumbled 9.5 percent in the past three months, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The kiwi slid 4.4 percent.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the Australian dollar compared with those on a gain -- so-called net shorts -- was a record 70,515 on July 2, figures from the Washington-based Commodity Futures Trading Commission show.

The Aussie fell as much as 0.5 percent earlier after Chinese data showed imports contracted 0.7 percent in June from a year earlier. The median estimate of economists surveyed by Bloomberg News was for a 6 percent increase.

China Slowing

“While everyone does accept that China is slowing, there still seems to be shock value when China data disappoints,” said Annette Beacher, Singapore-based head of Asia-Pacific research at TD Securities. “Aussie pretty much fell out of bed.”

The International Monetary Fund projected China’s growth will be 7.8 percent in 2013, down from an 8 percent April projection, it said yesterday as it trimmed its prediction for the global economy for a fifth-consecutive time.

“As long as this steady balance between slowing the contribution of investment to growth occurs in a steady way, it’s still very strong growth,” Rupa Duttagupta, a deputy chief in the world economic studies division of the IMF, said today on Bloomberg Television.

Swaps data compiled by Bloomberg show traders see a 60 percent chance the central bank will lower its benchmark rate to an unprecedented 2.5 percent at its next meeting on Aug. 6, from an already record low of 2.75 percent.

Debt Demand

A measure of demand at an auction of A$700 million ($642 million) in Australian government debt fell to the lowest since Nov. 30, 2011. The bid-to-cover ratio for the 3.25 percent notes due April 2029 slid to 1.54, according to the Australian Office of Financial Management. The ratio was 3.04 at the last sale of 2029 debt on June 19. The yield on Australia’s benchmark 10-year government bond dipped four basis points, or 0.04 percentage point, to 3.84 percent.

Demand for New Zealand’s dollar was buoyed after Finance Minister Bill English said the nation’s borrowing costs “are going to go up, it’s just a matter of when.”

“One of the risks to New Zealand is being the first developed country to lift interest rates,” English said at an event in Wellington. Investors would be attracted to New Zealand’s relatively higher yields “and we’d end up with an exchange rate going too high,” he said.

The Reserve Bank of New Zealand has kept its benchmark interest rate at a record-low 2.5 percent since March 2011 to help speed an economic recovery.

To contact the reporter on this story: Kevin Buckland in Tokyo at kbuckland1@bloomberg.net

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

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