Aussie Extends Weekly Advance as China Imports Beat Estimates

Australia’s dollar strengthened, extending its first five-day gain in three weeks, as a bigger-than-expected increase in Chinese imports offset the impact of a Reserve Bank downgrade to its growth forecasts.

The Australian currency was poised to rise versus most of its 16 major peers this week. It earlier weakened after the RBA retained its scope to lower interest rates in its quarterly monetary policy statement today. The Aussie, the most overvalued after the New Zealand dollar among major currencies, hasn’t tracked fundamentals, central bank Assistant Governor Guy Debelle said yesterday.

“The RBA’s doing their absolute best to talk the currency down and, given the fragile economic outlook, that may help them to some degree,” said Callum Henderson, the global head of currency research at Standard Chartered Plc in Singapore. “But positive news in terms of Chinese imports, particularly commodity imports, should be beneficial” for the Aussie, Henderson said.

The Australian currency added 0.1 percent to 94.63 U.S. cents as of 4:37 p.m. in Sydney, set for a 0.3 percent advance this week. Yesterday it sank 0.8 percent, the most since Oct. 29. New Zealand’s kiwi dollar rose 0.1 percent to 83.30 U.S. cents, set for a 0.8 percent climb since Nov. 1.

Australia’s 10-year government bond yield dipped three basis points to 4.13 percent, and is up from 4.07 percent on Nov. 1. Three-year debt yielded 3.07 percent, two basis points higher than a week earlier. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 3.50 percent. A basis point is 0.01 percentage point.

Exports Growth

China’s exports rose 5.6 percent in October from a year earlier while imports advanced 7.6 percent, resulting in a $31.1 billion trade surplus, the General Administration of Customs said today in Beijing.

Australia’s economic growth will be between 2 percent and 3 percent in the year to December 2014, the RBA said today in its quarterly monetary policy statement, compared with 2.5 percent to 3.5 percent forecast three months earlier.

The problem for Australia and other smaller economies is that external “financial factors” are driving up currencies, the RBA’s Debelle said yesterday at an International Monetary Fund conference in Washington.

The Aussie is 28 percent overvalued versus its U.S. counterpart as measured by purchasing power parity based on consumer prices, data compiled by Bloomberg show. Among major currencies, that’s second only to the New Zealand dollar, which is 31 percent overvalued against the greenback.

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