Aussie Weakens as China Data Signal Slower Start to Year

Australia’s dollar dropped against most major peers after Chinese factory output had its slowest start to a year since 2009, damping the outlook for the South Pacific nation’s commodity exports.

The so-called Aussie declined for a second day against its U.S. counterpart before a report on U.S. retail sales forecast to show continued improvement in the world’s biggest economy, following better-than-expected payrolls data. New Zealand’s dollar, known as the kiwi, traded near the lowest in more than two months against the greenback.

“The combination of weaker Chinese industrial production and a strong U.S. jobs number was never going to be good for the Aussie,” said Hans Kunnen, the Sydney-based chief economist at St. George Bank Ltd. “Aussie and kiwi will remain under pressure in the short term.”

The Australian dollar fell 0.2 percent to $1.0221 as of 5:04 p.m. in Sydney, extending a 0.3 percent decline at the end of last week. The New Zealand dollar slid 0.3 percent to 82.00 U.S. cents from March 8, when it touched 81.88 cents, the lowest since Dec. 28.

Chinese industrial production increased 9.9 percent in the first two months of 2013 from a year earlier, the statistics bureau said March 9. That trailed the 10.6 percent median estimate in a Bloomberg News survey of economists. China is the largest trading partner of both Australia and New Zealand.

U.S. ‘Resurgence’

In the U.S., retail sales probably rose 0.5 percent in February, a fourth consecutive gain, economists said before a March 13 report. U.S employment rose a higher-than-estimated 236,000 last month, Labor Department figures showed Friday. The jobless rate dipped to a four-year low of 7.7 percent.

“One of the downside risks for the Aussie has been a resurgence of the U.S. economy and we’re seeing elements of that,” St. George Bank’s Kunnen said. “Retail sales can be another chapter in that resurgence.”

Futures traders decreased bets the Australian dollar will gain against the greenback, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 7,149 on March 5, compared with 25,695 a week earlier.

The negative correlation between risk appetite and the U.S. dollar continues to break down, analysts at National Australia Bank Ltd. wrote in a research note today. That means that the Australian dollar may fall below $1.02 even if data this week don’t rekindle expectations for an early resumption of interest-rate cuts by the Reserve Bank of Australia, it said.

Rate Expectations

Interest-rate swaps data compiled by Bloomberg show traders currently see a 77 percent chance the RBA will keep the overnight cash rate target at 3 percent when they next meet on April 2. That’s up from 60 percent odds a week ago.

NAB releases its latest business survey tomorrow. A day later, Westpac Banking Corp. puts out a consumer confidence survey, while a gauge of home loans will probably show a rebound in January, according to a Bloomberg survey.

Australia’s 10-year yield advanced as much as seven basis points, or 0.07 percentage point, to reach 3.62 percent, the most since May 2. The three-year rate touched 3 percent, the highest since April 30. The two-year yield rose to 2.94 percent, the most since Sept. 17.

In New Zealand, the central bank will hold interest rates steady at 2.5 percent for a 16th straight meeting on March 14, according to every economist surveyed by Bloomberg.

The Reserve Bank of New Zealand “will probably keep its outlook broadly unchanged, including its forecast that it will start raising rates next year,” Kieran Davies, chief economist at Barclays Plc in Sydney, wrote in a research note today.

New Zealand’s 10-year yield climbed eight basis points to 3.85 percent, the highest since Feb. 25.

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