Australia’s dollar declined against most of its major peers after a preliminary survey showed China’s manufacturing is expanding at a slower pace, dimming the outlook for South Pacific nation’s exports.
Local bonds and the so-called Aussie fell versus the U.S. currency as Italy’s general election result estimates due today curbed demand for riskier assets. Australia’s dollar reached a 4 1/2-year high against the yen on speculation Japan’s government will nominate as central-bank head Haruhiko Kuroda, who has said expanding monetary stimulus can be justified.
“It’s a surprisingly softer number, suggesting that the Chinese economy is pulling back a little,” said Greg Gibbs, a Singapore-based senior currency strategist at Royal Bank of Scotland Group Plc. “It has contributed to some softness in the Australian dollar. The Aussie is in a gradual downtrend.”
The Australian dollar declined 0.4 percent to $1.0278 at 4:59 p.m. in Sydney from the end of last week. It touched 97.73 yen, the highest since August 2008, before trading at 96.81, 0.4 percent above the close on Feb. 22. New Zealand’s dollar slid 0.1 percent to 83.71 U.S. cents. The kiwi climbed 0.7 percent to 78.85 yen, adding to a 0.8 percent gain on Feb. 22.
The yield on Australia’s 10-year bonds fell three basis points, or 0.03 percentage point, to 3.51 percent.
The preliminary reading of a Purchasing Managers’ Index fell to 50.4 in February from 52.3 in January, according to a statement from HSBC Holdings Plc and Markit Economics today. That compared with the 52.2 reading expected by economists surveyed by Bloomberg News. China is Australia’s biggest trading partner and New Zealand’s second-largest export market.
In Australia, three of the four largest lenders expect the Reserve Bank to cut borrowing costs to an all-time low this year. Australia & New Zealand Banking Group and National Australia Bank see the overnight cash rate target dropping from 3 percent to 2.5 percent and 2.25 percent, respectively, by year-end. Westpac Banking Corp. predicts it will be 2.75 percent by Dec. 31. Commonwealth Bank of Australia, the biggest of the four so-called pillar banks, says Governor Glenn Stevens will keep rates unchanged this year.
Interest-rate swaps data compiled by Bloomberg show traders see a 28 percent chance the RBA will lower the rate to 2.75 percent on March 5.
There may be about “25 basis points worth of further cuts over the next nine months by the RBA,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk management company. “A lot will depend on China and its demand for Australian exports.”
In Italy, initial election estimates will be released by pollsters shortly after voting stations close at 3 p.m. in Rome. The Interior Ministry will start its count with the Senate today and then move on to the Chamber of Deputies.
“A coalition government will probably need to be formed, which could take a week or more,” Sharon Zollner, senior economist at ANZ Bank New Zealand Ltd. in Wellington, wrote in a report today. “The resultant uncertainty would weigh on sentiment.”
Japan’s Prime Minister Shinzo Abe is very likely to nominate Asian Development Bank President Kuroda as Bank of Japan governor, according to a government official with knowledge of the discussions. BOJ Governor Masaaki Shirakawa and two deputies will resign on March 19.
The central bank has “really substantial room” for further loosening and additional measures could be justified this year, Kuroda said in a Feb. 11 interview.
“If Kuroda gets confirmed later this week, then you might even see Aussie-yen break 100,” Rochford’s Averill said.