Australia’s dollar fell against its U.S. counterpart, trimming a weekly gain, after service-industry indexes in the South Pacific nation and China declined.
Australian bonds dropped, pushing benchmark 10-year yields to the highest in more than four months after gains in Asian stocks curbed demand for haven assets. The so-called Aussie and New Zealand’s dollar were supported against the yen amid speculation the Japan’s central bank will boost stimulus to weaken its currency.
“The Aussie is looking a bit overvalued,” said Masashi Murata, a currency strategist in Tokyo at Brown Brothers Harriman & Co. “The risk scenario for the Aussie is for the recovery in the Chinese economy to halt and Australia’s domestic demand to deteriorate.”
The Australian dollar fell to $1.0441 as of 4:25 p.m. in Sydney, down 0.2 percent from yesterday and poised for a 0.7 percent gain this week. It climbed 0.4 percent to 91.66 yen from yesterday, when it touched 91.76, the highest since September 2008.
New Zealand’s dollar, known as the kiwi, dropped 0.4 percent to 82.47 U.S. cents from yesterday, paring its gain since Dec. 28 to 0.6 percent. It rose 0.2 percent to 72.39 yen.
The yield on Australia’s 10-year government bond rose as much as 10 basis points, or 0.1 percentage point, to 3.45 percent, the highest since Aug. 21. The MSCI Asia Pacific Index of stocks rose 0.3 percent.
HSBC Holdings Plc and Markit Economics said today a purchasing managers’ index of Chinese non-manufacturing industries fell to 51.7 in December from 52.1 in the previous month. Fifty is the dividing line between an expansion and contraction.
An index published today by the Australian Industry Group and Commonwealth Bank of Australia showed services shrank for an 11th-straight month in the South Pacific nation, with a reading of 43.2 in December. November’s reading was 47.1.
The Australian dollar has fallen 1.1 percent in the past 12 months according to Bloomberg Correlation-Weighted Currency indexes, a set of gauges that track 10 developed market currencies. New Zealand’s currency has gained 3.3 percent in the same period, the best performer after the Norwegian krone.
Interest-rate swaps data compiled by Bloomberg show traders see a 44 percent chance the Reserve Bank of Australia will lower its benchmark rate to 2.75 percent in February, lower than the 59 percent probability indicated at the end of 2012.
The Bank of Japan will next meet on Jan. 21-22 after Governor Masaaki Shirakawa and his policy board added 10 trillion yen ($114 billion) to its 66 trillion-yen asset purchase program last month. Deputy Governor Kiyohiko Nishimura is scheduled to speak today in San Diego.
Benchmark interest rates are 3 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 risk in such trades is that currency-market moves will erase profits.