Australia’s dollar fell to its lowest in almost a year after a private report showed Chinese manufacturing is contracting and before U.S. data that may signal a sustained recovery in the world’s largest economy.
New Zealand’s currency slid two percent versus the yen as investors sold higher-yielding assets with Asia stocks poised for their biggest drop since September 2011. The Aussie extended this month’s decline to 7.4 percent, set for the biggest drop since September 2011, after Federal Reserve Chairman Ben S. Bernanke said yesterday the central bank may taper bond purchases if it’s confident of sustained gains in the economy.
“The China PMI is another weight that’s adding to the momentum pushing Aussie down,” said Kara Ordway, a currency strategist at City Index Group Ltd. in Sydney. “Bernanke’s comments yesterday hurt the currency and the domestic data in Australia hasn’t been up to par as well.”
The Australian dollar dropped 0.9 percent to 96.10 U.S. cents as of 4:50 p.m. in Sydney after touching 95.94, the lowest level since June 1. The kiwi declined 0.7 percent to 80.18 U.S. cents and touched 80.06, the weakest since Sept. 7.
Versus the yen, the Aussie fell as low as 97.51, the least since April 4, before trading 2.1 percent lower at 97.97. The kiwi dropped 2.2 percent to 81.71 yen.
The preliminary reading of 49.6 for the Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics compares with a final 50.4 for April. A reading below 50 indicates contraction. The number was lower the 50.4 median estimate in a Bloomberg News survey of 13 analysts and the first contraction in seven months.
The MSCI Asia Pacific Index of regional stocks slid 3.7 percent and Japan’s Nikkei 225 Stock Average slumped 7.3 percent. The Standard & Poor’s GSCI Index of commodities dropped 0.6 percent, falling for a third day.
Ford Motor Co. said it will stop making cars in Australia, nine decades after founder Henry Ford first began building Model Ts in the country, as the strength of nation’s currency undermines the local industry’s ability to compete with imports.
Even after recent declines, the Aussie is still trading above its 85.47 U.S. cent average of the past decade.
Australia’s dollar will drop to 95 cents by Dec. 31 and further to 90 by the end of 2014, UBS AG said today, revising earlier forecasts for it to trade at $1 and 95 cents, respectively.
The currency will “gradually lose its immunity to commodity price declines,” UBS analysts including Sydney-based Scott Haslem wrote in a note to clients today. The central bank’s interest rate cut this month eroded the yield advantage the nation enjoys, while also making it cheaper to enter positions betting on the currency’s decline, they said.
The Aussie and kiwi fell against most major peers before a U.S. Labor department report forecast to show fewer Americans filed claims for jobless benefits last week. The number of applications for unemployment insurance payments fell by 15,000 to 345,000 in the week ended May 18, according to the median estimate in a Bloomberg News survey.
“It’s the question now of when does the stimulus start to be wound back?” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. “There will be further fallout to Bernanke’s remark over the next few days and that will probably push the U.S. dollar higher and push currencies like the Aussie and kiwi lower.”
Australia’s 10-year bond yield rose three basis points, or 0.03 percentage point, to 3.30 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to interest-rate expectations was little changed at 2.92 percent.