Aussie Declines as China Data Suggest Slowing Demand

The Australian dollar fell for the first time in three days versus its U.S. peer after a report showed China’s manufacturing may contract at a faster pace, fanning concern demand for commodity exports will decrease.

The New Zealand dollar erased gains after earlier rising to a two-week high as Federal Reserve Bank of Chicago President Charles Evans said easier monetary policy is needed to support global growth and China officials suggested they were prepared act to stimulate the economy. The South Pacific nations’ currencies fell as German and French leaders held debt-crisis talks in Berlin.

“The Aussie this morning was pretty vulnerable on the back of the Chinese PMI,” Mary Nicola, a New York-based currency strategist at BNP Paribas SA, said in a telephone interview. “We’ve remained pretty bullish on Aussie because we do expect quantitative easing and we do expect policy stimulus from China.”

Australia’s currency fell 0.6 percent to $1.0441 yesterday in New York after earlier climbing as high as $1.0545. The New Zealand dollar touched 81.87 U.S. cents, the highest since Aug. 7, before falling 0.2 percent to 81.27 U.S. cents.

“I don’t need to see any more data to know that I think we should have more accommodation,” Evans told reporters yesterday in Beijing.

Fed Minutes

Evans’s comments came after the minutes of the Fed’s July 31-Aug. 1 meeting released Aug. 22 said “many members judged that additional monetary accommodation would likely be warranted fairly soon” unless there is a substantial and sustainable improvement in the economy. Central bank officials next meet on Sept. 12-13.

A purchasing managers’ index for China’s manufacturing was at 47.8 in August on a preliminary basis, a report from HSBC Holdings Plc and Markit Economics showed yesterday. If confirmed, it would be the lowest since November and extend to 10 months the longest run of readings below the expansion-contraction dividing line of 50 in the index’s eight-year history.

China’s central bank governor Zhou Xiaochuan on Aug. 22 said further interest-rate adjustments can’t be ruled out. The country is Australia’s largest trading partner and New Zealand’s second-biggest export destination.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE