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BlackRock’s Miller Avoiding Australian Dollar as China Cools

BlackRock’s Miller Avoiding Australian Dollar as China Cools
The Australian dollar’s 28 percent advance against the greenback in the past year is the best performance among 31 major currencies versus the dollar, according to Bloomberg data. Photographer: Jack Atley/Bloomberg

Australia’s dollar isn’t attractive after the currency climbed more against the greenback than any major counterpart in the past year, BlackRock Inc. said.

The so-called Aussie has surged as the Reserve Bank of Australia raised interest rates to the highest in the developed world to curb price pressures amid demand from China for the country’s commodities. Chinese reports this month showed manufacturing growth slowed to the lowest level since February 2009 and services industries expanded at the slowest pace in four months in the Asian nation, Australia’s largest trading partner. Retail sales in Australia dropped in May, a report today showed.

“You need to have a very strong bullish view of the global economy to want to stay in Aussie longs,” Stephen Miller, a managing director in Sydney at BlackRock, which oversees $3.7 trillion globally, said in a July 1 interview. “My view isn’t optimistic enough for me to want to get involved in the Aussie dollar.” A long position is a bet that an asset will rise in value.

Australia’s dollar traded at $1.0746 as of 4:40 p.m. in Sydney from $1.0770 in New York on July 1, when it touched $1.0790, the most since May 11. The currency rose to $1.1012 on May 2, the strongest since it was freely floated in 1983.

The Aussie’s 28 percent advance against the dollar in the past year is the best performance among 31 major currencies versus the greenback, according to Bloomberg data.

China Growth

Futures traders decreased bets last week that the Australian dollar will gain against the greenback, figures from the Washington-based Commodity Futures Trading Commission show.

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 -- was 46,897 on June 28, the least since Jan. 25.

The Aussie will fall to $1.04 by December according to the median forecast of analysts polled by Bloomberg News in what would be the fifth-biggest drop among major currencies according to separate surveys.

China’s economic growth target for this year is “difficult” to achieve, Vice Premier Wang Qishan said in a statement on the government’s website yesterday.

It’s hard to balance management of the economy and inflation “given the complications and uncertainty in the global situation,” Wang said. He made the comments in a conference in Hebei province early this month, the statement said.

China’s slowdown along with concerns about growth in the U.S. and Europe has spurred a 6.3 percent drop in the Reuters/Jefferies CRB Index of raw materials since March 31.

Rates Support

The Australian dollar fell today after a Bureau of Statistics report showed retail sales fell 0.6 percent in May from the previous month, compared with the median forecast in a Bloomberg News survey for a 0.3 percent increase. Home-building approvals dropped 7.9 percent in May from a month earlier, according to a separate statistics bureau report.

“There are better ways of employing risk in your portfolio than buying the Aussie at the moment,” Miller said. He prefers New Zealand’s dollar on prospects Reserve Bank Governor Alan Bollard will increase record-low key rates as the nation recovers from a Feb. 22 earthquake.

Benchmark rates are 4.75 percent in Australia and 2.5 percent in New Zealand, compared with as low as zero in the U.S. and Japan, attracting investors to the South Pacific nations’ higher-yielding assets.

The RBA, which increased its target rate by 175 basis points from October 2009 to November last year, will keep borrowing costs unchanged tomorrow, according to all 28 economist forecasts compiled by Bloomberg News.

The Aussie fell as low as NZ$1.2803 on June 13, the least since Jan. 28, and declined 0.5 percent at NZ$1.2950 today.

“That’s not to say we see a fundamental deterioration in the backdrop for the Aussie, it’s just that it’s come so far,” Miller said. “Valuations are stretched.”

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