Aussie Set for Weekly Gain Before Chinese Production, Sales Data

Dec. 7 (Bloomberg) -- Australia’s dollar was set for a five-day advance before Chinese data next week that may show the world’s second-largest economy is picking up.

The so-called Aussie was near a two-month high after a private report showed the nation’s construction industry contracted at a slower pace. Demand for the currency was also supported after data showed Australia’s trade deficit widened by less than economists predicted as exports withstood a slower global economy and capital goods purchases increased.

“Chinese economic data are improving after concern about a slowdown,” said Teppei Ino, a Tokyo-based analyst at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group by market value. “That’s providing some support for the Australian and New Zealand dollars.”

Australia’s currency traded at $1.0478 as of 5:07 p.m. in Sydney. Yesterday it rose 0.3 percent to $1.0486 in New York after touching $1.0516, the highest since Sept. 21. The New Zealand dollar, nicknamed the kiwi, bought 83.19 U.S. cents from 83.27. The Aussie has risen 0.5 percent this week, while the kiwi has advanced 1.4 percent.

China’s industrial production probably rose 9.8 percent in November from a year earlier, the fastest pace since March, according to the median estimate of economists surveyed by Bloomberg News. Retail sales are forecast to have increased 14.6 percent last month, compared with a 14.5 percent gain in October. The National Bureau of Statistics is due to release the figures on Dec. 9.

Aussie Outlook

“Stabilization in expectations for Asia is likely to prove supportive for China-linked FX and asset markets,” Todd Elmer, head of Group-of-10 foreign-exchange strategy for Asia excluding Japan at Citigroup Inc. in Singapore, wrote in a research note yesterday. The Australian dollar may rise above $1.11, he wrote.

Australia’s construction performance index rose to 37 last month, the highest since January, from 35.8 in October, a report from the Australian Industry Group and the Housing Industry Association showed today. A reading below 50 represents contraction.

The nation’s imports exceeded exports by A$2.09 billion ($2.19 billion) in October, government figures showed today. Economists had forecast a trade shortfall of A$2.2 billion in a Bloomberg News poll.

The country’s official foreign exchange reserves fell to the equivalent of $48.17 billion in November from $51.24 billion in October, according to figures published today by the Reserve Bank of Australia. It was the first decrease in reserves since August.

The Aussie was near a one-month low versus its New Zealand counterpart amid speculation Australia’s central bank will reduce borrowing costs to help protect the nation’s economy.

RBA Outlook

Traders see a more than 50 percent chance that the RBA will cut its overnight cash-rate target to 2.75 percent in February, according to data compiled by Bloomberg on overnight-index swaps. The RBA lowered the rate on Dec. 4 by a quarter percentage point to 3 percent.

“More cuts are priced into the RBA cash rate,” said Joseph Capurso, a Sydney-based currency strategist at Commonwealth Bank of Australia, the nation’s biggest lender. Because of the difference in monetary policy prospects for the two countries, the Aussie-kiwi exchange rate is more likely to fall, he said.

The Reserve Bank of New Zealand said yesterday after a policy meeting that the nation’s growth is expected to quicken over the next two years. It left rates at 2.5 percent.

Australia’s currency was little changed at NZ$1.2594. It touched NZ$1.2580 yesterday, the weakest since Nov. 6.

The yield on Australia’s benchmark three-year government note was unchanged at 2.60 percent. New Zealand’s two-year swap rate reached 2.7 percent, the highest since Nov. 7.

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To contact the editor responsible for this story: Rocky Swift at