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Aussie Dollar Declines on Widening Trade Deficit, Lower Equities

Jan. 8 (Bloomberg) -- The Australian dollar fell for the first time in three days after the nation reported the biggest trade deficit in more than four years.

New Zealand’s dollar weakened after Asian equities slid by the most in two weeks, reducing demand for higher-yielding assets. Both nations’ dollars also weakened against the yen on speculation recent losses for Japan’s currency were excessive.

“The big trade deficit reported in Australia and lower equity markets are driving a risk-off sentiment,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s largest lender. “That’s pushing the Australian dollar lower.”

Australia’s currency fell 0.2 percent to $1.0478 as of 4:46 p.m. in Sydney and declined 0.6 percent to 91.70 yen. New Zealand’s dollar weakened 0.2 percent to 83.57 U.S. cents and 0.5 percent to 73.13 yen.

Australia’s imports outpaced exports by A$2.64 billion ($2.77 billion) in November, the biggest trade shortfall since March 2008, from a revised A$2.44 billion deficit the prior month, data compiled by the statistics bureau showed today.

Traders see about a 60 percent chance the Reserve Bank of Australia will lower the benchmark interest rate from 3 percent this quarter, according to Bloomberg data on overnight index swaps. This compares with a less than 20 percent probability that New Zealand’s central bank will reduce borrowing costs from 2.5 percent.

Consumer Spending

The New Zealand dollar remained higher against the Australian currency, following a two-day advance, after data showed consumer demand rose in the smaller nation. Spending on credit and debt cards rose 0.5 percent last month from November, said Paymark, which processes three-quarters of all card transactions, in an e-mailed statement today.

The New Zealand dollar traded at NZ$1.2538 per Aussie after gaining 0.7 percent in the past two days to NZ$1.2548 yesterday.

“The Aussie-kiwi will continue to trend lower,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. “The outlook for New Zealand’s fundamentals is pretty good,” while Australia’s “economy domestically perhaps has a slightly less rosy outlook.”

The MSCI Asia Pacific Index of shares declined 0.6 percent today, falling for a second day.

Both the Aussie and kiwi dollars weakened against the yen as technical indicators signaled the South Pacific nations’ currencies had risen too rapidly.

The Aussie’s 14-day relative-strength index climbed to 77 against the yen yesterday, while the kiwi’s indicator advanced to 75. Readings above 70 indicate an asset price may have risen too rapidly and be poised to reverse course.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net

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

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