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Aussie Drops to 5-Week Low on Retail Sales, China Data

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Sept. 3 (Bloomberg) -- Australia’s dollar touched its lowest level in five weeks and government bonds extended record gains after domestic retail sales dropped and manufacturing shrank in China, the nation’s biggest trading partner.

The so-called Aussie slid to its weakest in more than a month against the yen after the statistics bureau said July sales fell by the most in almost two years and following a Sept. 1 report that showed Chinese manufacturing unexpectedly shrank for the first time in nine months. New Zealand’s currency, nicknamed the kiwi, weakened versus most of its peers after the country’s second-quarter terms of trade declined.

“You have both domestic and external hits to the Aussie,” said Callum Henderson, global head of currency research at Standard Chartered Plc in Singapore. “Domestically, the retail sales number was much worse than expected. The Chinese data is obviously bad for Australian exports, so data is weak across the board.”

The Australian dollar lost 0.6 percent to $1.0260 at 4:46 p.m. in Sydney after earlier touching $1.0240, the lowest level since July 25. It fell 0.7 percent to 80.32 yen after earlier declining to 80.12, also the weakest since July 25.

New Zealand’s currency slid 0.4 percent to 80.03 U.S. cents. It reached 62.48 yen, the least since July 26, before trading at 62.66 yen, 0.5 percent lower than the close in New York on Aug. 31.

Yields Fall

Australian 10-year yields closed at 3.07 percent after earlier falling as much as nine basis points, or 0.09 percentage point, to 3 percent, the lowest since July 27. The bonds advanced for a 12th day, the longest stretch of gains since at least 1990, when Bloomberg began compiling daily data. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, dropped three basis points to 2.64 percent.

Australian retail sales fell 0.8 percent in July, according to figures released today by the Bureau of Statistics. That’s the biggest decline since October 2010 and compares with economist forecasts in a Bloomberg News survey of a 0.2 percent advance.

The data comes before Reserve Bank officials gather for a policy decision tomorrow. They are expected to keep the overnight cash-rate target at 3.5 percent for a third meeting, according to all 24 economists surveyed Aug. 31 by Bloomberg.

A manufacturing gauge by the Australian Industry Group and PricewaterhouseCoopers showed a contraction for a sixth-straight month, according to a separate report today.

Chinese Manufacturing

China’s manufacturing Purchasing Managers Index fell to 49.2 last month from 50.1 in July, the National Bureau of Statistics and China Federation of Logistics and Purchasing said at the weekend. A final reading released today for a similar gauge by HSBC Holdings Plc and Markit Economics indicated that China’s factory output shrank in August by the most since March 2009. For both gauges, 50 is the dividing line between contraction and expansion.

“Concerns about the extent to which China is slowing and is not meeting an aggressive policy response is clearly on the negative side of the ledger as far as the Aussie dollar is concerned,” said Ray Attrill, the Sydney-based global co-head of foreign-exchange strategy at National Australia Bank Ltd.

The RBA said today its commodity price index dropped to 90.3 in August, the lowest since April 2010. Prices for iron ore, Australia’s biggest export earner, have tumbled 33 percent this quarter.

‘Deteriorated Significantly’

“The reality is the Aussie overall will remain well above commodity fundamentals, but those commodity fundamentals have deteriorated significantly recently,” Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore, said in a Bloomberg Television interview today. “I’m not hugely bearish on the Aussie dollar, but certainly the near-term risk is to the downside.”

Australia’s currency has declined 3.9 percent in the past month, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. Its New Zealand counterpart posted the second-biggest drop, falling 3.2 percent over the same period.

New Zealand’s currency extended its loss after the country’s Terms of Trade Index fell by 2.6 percent in the the three months ended June 30 as weak markets curbed returns from dairy and meat exports. That was more than the 2 percent forecast by economists and the fourth consecutive drop.

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net

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

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